Dell deal in shareholders' best interest

Feb 12 2013 07:57

New York - Dell said on Monday its proposed $24.4bn private equity buyout plan is "in the best interests of stockholders," brushing aside criticism from a key investor that it undervalues the tech giant.

In a statement filed with securities regulators, Dell released a brief comment which it said was in response to inquiries on the matter.

It said a special committee of its board considered "an array of strategic alternatives" and had "retained a prominent management consultant to help it assess the company's strategic position."

"Based on that work, the board concluded that the proposed all-cash transaction is in the best interests of stockholders," the statement said.

"The transaction offers an attractive and immediate premium for stockholders and shifts the risks facing the business to the buyer group. In addition, and importantly, the go-shop process provides stockholders an opportunity to determine if there are alternatives that are superior to the present offer."

The statement came after an investment firm claiming to be the largest outside shareholder in Dell said the proposal to take the firm private "grossly undervalues" the computer maker.

Southeastern Asset Management, which claims to hold 8.5% of Dell shares on behalf of clients, said it would fight the proposal and noted its objections to the deal in a letter to the board of directors, also filed with US securities regulators.

Dell unveiled its plan to go private Tuesday in a deal giving founder Michael Dell a chance to reshape the former number one PC maker away from the spotlight of Wall Street, with the backing of equity investment firm Silver Lake and a loan from Microsoft.

The company said it had signed "a definitive" agreement to give shareholders $13.65 per share in cash - a premium of 25% over Dell's closing share price on January 11, before reports of the deal circulated.

The move, which would delist the company from stock markets, could ease some pressure on Dell, which is cash-rich but has seen profits slump, as it tries to reduce dependence on the slumping market for personal computers.

Dell shares gained 0.5% to close at $13.70.

A research note by the brokerage Stifel Nicolaus said its "sum of the parts analysis" values Dell in the range of $16 to $17 a share, using EV/EBIT multiples, or some 20% more than the buyout offer.

The analysts said investors "should consider" Southeastern's valuation analysis "and question the changes in Dell's forward outlook."

Barclays analyst Hale Holden said that as a result of the investor concern, "speculation has shifted to concerns that the deal may not be consummated," and added: "This is not entirely unexpected since it follows closely the pattern of other large management-led buyouts."

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