Dell committee defends $24.4B sale as best choice
By Michael Liedtke on March
SAN FRANCISCO (AP) — The
Dell Inc. committee that negotiated the slumping PC maker's $24.4 billion
buyout is standing behind the deal despite the misgivings of major
shareholders who believe the price is too low.
In a four-paragraph
statement released Wednesday, the four directors who oversaw the
discussions to sell Dell provided their most extensive defense of the deal
since it was announced a month ago.
CEO Michael Dell, backed
by other investors led by investment firm Silver Lake, is trying to buy
out the company he founded for $13.65 per share.
Much of the information
in the statement had already been disclosed. The directors' decision to
publicly reiterate their rationale for agreeing to the deal currently on
the table suggests that they aren't having second thoughts. It comes as
Dell's largest independent shareholder prepares to lead a possible mutiny.
Management, the investment firm that owns an 8.4 percent stake in Dell
Inc., has demanded the names of other shareholders. That information could
be used to rally opposition to the deal. Mutual fund manager T. Rowe
Price, which owns a nearly 5 percent stake in Dell, also is lobbying
against the deal.
Those critics may soon
be joined by another nettlesome investor, billionaire Carl Icahn. He
specializes in buying out-of-favor stocks and then pressuring corporate
boards to make deals or other moves to boost the share price.
sources, financial news channel CNBC reported Wednesday that Icahn has
been accumulating up to 100 million shares of Dell stock — an amount that
would give him a roughly 6 percent stake in the company. Icahn didn't
immediately return phone messages Wednesday.
CNBC's sources said
Icahn wants Dell to pursue other options besides a sale, including paying
a special one-time dividend to current shareholders.
That's one of the
alternatives that Dell's special committee said it already considered
during a "rigorous" five-month review. That analysis culminated in an
agreement to sell the company to Michael Dell and the investment group for
the $13.65-per-share price.
That's 37 percent above
the shares' average trading price during the 90-day period before word of
the buyout negotiations leaked out in mid-January. But the stock stood $10
higher, at about $24 per share, when Michael Dell returned for a second
stint as CEO in 2007. That's the price Southeastern contends Dell is
Many investors are
betting the pot will have to be sweetened to get a deal done. Dell's stock
rose 25 cents, or nearly 2 percent, to close Wednesday at $14.32. The
shares have been trading above the current buyout offer for the past three
Before accepting the
$13.65-per-share offer, the special committee said it considered a variety
of other options. Besides a one-time dividend, these alternatives included
revising the company's plan to diversity beyond PCs and breaking up the
company so its operations could be sold in parts. The committee said it
reached its decision in consultation with experts that included investment
bankers from JP Morgan.
Shareholder Forum, a
group that seeks to protect shareholder interests, wants access to the
same information that influenced Dell's special committee to sell at
$13.65 per share. The information would be used by experts to perform an
independent evaluation of the proposed sale to help shareholders
understand if it's the best choice, according to a Tuesday letter sent to
Michael Dell by Gary Lutin, a former investment banker who runs the
The group is acting as a
delegate of an unidentified Dell shareholder, who Lutin says is not
Southeastern Asset Management.
If second-guessing of
the Dell deal continues, the spotlight on the board's special committee is
likely to intensify. The committee is chaired by Alex Mandl, a former
telecommunications executive. The three other committee members are Laura
Conigliaro, a former computer industry analyst for Goldman Sachs; Ken
Duberstein, who was President Ronald Reagan's chief of staff before
starting his own consulting firm; and Janet Clark, the chief financial
officer of Marathon Oil Corp.
The special committee
was formed last August after Michael Dell notified the Round Rock, Texas,
company that he was exploring a buyout bid in partnership with other
investors. Michael Dell has agreed to contribute 273 million of the
company stock that he controls and $750 million in cash to help finance
the buyout, which rely primarily on loans from PC software maker Microsoft
Corp. and an assortment of banks.
Michael Dell is trying
to reduce the company's dependence on PCs, which are becoming tougher to
sell as more people switch over to smartphones and tablet computers. He
believes the company can thrive again by expanding into business software,
data analytics and storage and other more profitable niches in technology
— a transition that Michael Dell believes will be easier without having to
worry about the short-term financial interests of Wall Street. If the
current agreement is approved, Dell will end its 25-year history as a
publicly traded company.
In an attempt to avoid
allegations that it was biased toward Michael Dell's offer, the special
committee has left open the door for a higher bid. The committee said it
has provided financial incentives for investment banker Evercore Partners
to find a better deal by March 22. If another enticing proposal surfaces,
the special committee said it will negotiate past the March 22 deadline.
The special committee
said that it "has worked hard, and continues to work hard to produce the
best outcome for Dell's shareholders."
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