Dell’s (DELL) largest outside shareholder revealed plans on Friday to use “all options” to block the struggling PC maker’s leveraged buyout, saying the current $24.4 billion go-private deal “grossly undervalues” the company.
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The announcement by Southeastern Asset Management, which said it owns about 8.5% of Dell’s outstanding shares, sent the company’s stock jumping to session highs.
Citing “extreme disappointment” with the transaction that was revealed earlier this week, Southeastern said it will not vote in favor of the proposed transaction as currently structured.
That dissension could play a role as Dell said the deal, the largest LBO since 2007, is subject to a vote of unaffiliated shareholders. Michael Dell, the company’s founder and CEO, is pledging his 14% stake towards the go-private deal.
The management takeover “appears to be an effort to acquire Dell at a substantial discount to intrinsic value at the expense of public shareholders,” Southeastern said in a Securities and Exchange Commission filing on Friday.
Southeastern said it intends to use “all options” at its disposal to oppose the proposed deal, including but not limited to a proxy fight, litigation claims and “any available Delaware statutory appraisal rights.”
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Michael Dell and private-equity firm Silver Lake Partners teamed up on the $24.4 billion deal that was unveiled on Tuesday, agreeing to pay $13.65 a share in cash, representing a 25% premium over Dell’s close the day before M&A speculation began swirling but a 26% discount to its 52-week high of $18.36 set in February 2012.
Southeastern said that price tag “clearly represents an opportunistically timed bid to take the company private at a valuation far below Dell’s intrinsic value, and deprives public shareholders of the ability to participate in the company’s substantial future value creation.”
The shareholder group noted Dell Financial Services is carrying net cash per share of $3.64 after deducting structured debt, the financial services business has a book value of $1.72 a share and the company has spent $7.58 a share on acquisitions since 2007 that have not been written down, equaling $12.94 a share before Dell’s other businesses are even considered.
By going private, Michael Dell is betting he can accelerate the company’s transformation into a modern IT company away from the pressure of Wall Street analysts.
“We can deliver immediate value to stockholders, while we continue the execution of our long-term strategy and focus on delivering best-in-class solutions to our customers as a private enterprise,” Michael Dell said in the deal announcement on Tuesday.
Shares of Dell turned positive on the Southeastern news, ending the day up 0.74% to $13.63.