Southeastern Demands Dell’s Stockholders List

Dell Inc.

Dell Inc.

On the 5th of March, Southeastern Asset Management Inc., which happens to be Dell’s largest long-term shareholder, requested Dell Inc.’s stockholder list in an official paper sent to the company’s board of directors. The letter disclosed that the $24.4 billion proposed buyout conducted by Dell CEO Michael Dell and Silver Lake reflected the weak position of the company.

Undervalued Buyout

Not surprisingly, Southeastern Asset Management Inc. requested financial report and the stockholder list of the world’s third largest PC maker. On the 5th of March, Southeastern Asset Management filed a demand notice with the US Securities Commission on behalf of Longleaf Partners Fund, a primary client of the investment company.  In February 2013, the Board of Directors at Dell Inc. informed that it decided to sell the company to its founder and CEO Michael Dell along with investor Silver Lake for around $24.4 billion or roughly $13.65 per share. Moreover, if the buyout deal is sealed, it will end the 25-year-long period that Dell served as a public company and enable Michael Dell to set performance targets without the need of Wall Street to review its quarterly profits.

However, Southeastern Asset Management believes that the $24.4 billion proposed buyout would deprive shareholders from obtaining “meaningful and straightforward information”. The Memphis-based investment firm, which currently owns an 8.4 percent stake in Dell, has strongly opposed the $24.4 billion proposed buyout. In addition, Southeastern Asset Management suggested that Dell should raise the purchase price to nearly $24 per share. The investment firm also stated that Dell was emphasizing the impact of poor fourth quarter sales of 2012 in order to justify the leveraged buyout.

Major Dell Investors Oppose Deal

Along with Southeastern Asset Management, Dell’s top four investors hold the view that the $24.4 billion proposed buyout would sharply undervalue the company. For example, T. Rowe Price Group Inc. has already underlined it will not vote for the deal at its current price. Moreover, Richard Pzena is also widely expected to vote against the leveraged $24.4 billion proposed buyout. Southeastern Asset Management is winning support from other investors who are strongly convinced that the low purchase price of the buyout would demonstrate that Dell is an undervalued company. However, Southeastern Asset Management cannot control the voting rights of all the shareholders possessed by Dell. Only 15 percent of the shareholders have confirmed to vote against the inadequate buyout.

Dell Inc., which currently employs around 14,000 people globally, is planning to reduce production of PCs and focus on more profitable technology that can reap greater revenues. Billionaire founder Michael Dell decided to not express any views on the $24.4 billion proposed buyout of the company. Since the news of the buyout came to light in January, stock has drastically climbed by nearly 30 percent. Moreover, shares of the company rose by approximately 0.5 percent to $14 in New York trading.

In addition, Southeastern Asset Management has pledged to use everything in its power to seize the leveraged deal, even if that means teaming up with other investors for a proxy fight against Dell.

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Jay Raol

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