Dell Inc's largest external shareholder is demanding that the PC maker open its books, signaling it could become more active in opposing founder Michael Dell's proposal to take the company private for more than $24 billion.
Southeastern Asset Management, the largest of a clutch of investors who say the buyout proposed by Dell and private-equity house Silver Lake sharply undervalues the world's No. 3 PC maker, called for "straightforward information" on behalf of its top client, Longleaf Partners Fund.
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The Memphis-based firm run by activist investor Mason Hawkins also criticized the silence of Dell executives about the deal during a February earnings call. In a letter to Dell included with a Tuesday filing, the firm accused the company of emphasizing a decline in PC sales, while ignoring growth in its IT services division, to justify an inadequate buyout price.
"Under the current buyout proposal, management and Silver Lake stand to receive all of the future upside, while denying shareholders, who have paid to reposition the company, the opportunity to reap the rewards of our investment," Southeastern said in its filing.
Michael Dell, teaming up with Silver Lake and top global software maker Microsoft Corp, is offering $13.65 a share to buy out the company, but at least four of its largest investors are opposed to the deal.
Shareholders representing almost 14 percent of Dell shares, led by Southeastern with a stake of more than 8 percent, including options, have said they will vote against the proposed buyout. No. 3 shareholder T. Rowe Price has also spoken out against the deal.
"The company will review the request by Southeastern Asset Management for Dell stockholder lists and other shareholder related information and respond in a timely fashion," Dell spokesman David Frink said on Tuesday.
Michael Dell created the computer maker from his college dorm room in 1984 and grew the company into a model of innovation in the early 2000s for pioneering online ordering of custom-configured PCs. But it missed the big industry shift to tablets and smartphones and is now trying to reinvent itself as a seller of services to corporations, an internal overhaul that some analysts say might be better conducted away from public scrutiny.
Its billionaire founder now holds roughly 16 percent of the company and needs a majority of shareholders - excluding himself - to vote for the deal.
The founder and CEO did not join a management discussion of quarterly financial results during a conference call with analysts last month because of his participation in the buyout. Dell executives also did not comment on the buyout.
The company also declined to provide any financial forecast for fiscal 2014 or the fiscal first quarter, citing the proposed buyout, and it changed the way it reported the financial results of divisions.
Southeastern has suggested several alternatives it says would produce a better outcome for public shareholders. Dell could borrow money to make a major share repurchase, or the company could be broken up and the units sold separately.
Another approach would have been to return Dell's growing overseas cash reserve to all shareholders instead of using it to fund the proposed buyout at their expense, the fund added in its letter.
Dell shares closed up 7 cents at $14.07 in afternoon trading, about 3 percent above the $13.65 offer price.
Since news of the proposed buyout emerged in January, the stock has gained over 30 percent, a rally that analysts say might evaporate if the deal falls through.
Dell has said it plans to file a proxy statement with the U.S. securities regulators on the merger agreement.
(Reporting By Jennifer Saba and Nicola Leske in New York.; Editing by John Wallace and Andre Grenon)