THE WALL STREET JOURNAL.
up-to-the-minute take on deals and deal makers
2013, 8:59 AM
Dell Emphasizing Struggling PC’s to Justify Deal Price
Dell Inc.'s largest independent shareholder believes the company is
“intentionally emphasizing” the struggling personal-computer in order to
justify a buyout from founder
and private-equity group Silver Lake.
Southeastern Asset Management sent a new letter to the board of directors
of Dell on Tuesday alleging the company’s recent results underplayed the
turnaround at the PC maker, a turnaround the buyout group will look to
Specifically, Southeastern, which has said it won’t vote for the deal at
the current price, took issue with Dell’s decision not to include more
detailed results on its segments and not to address questions about the
“Given the significance of the pending, go−private transaction,
shareholders should be provided with meaningful, straightforward
information,” Southeastern wrote. “By changing to product segment
reporting going forward, but not providing this information for the period
just ended, we believe management is intentionally emphasizing declining
PC sales in order to justify its inadequate buyout price.”
The shareholder said the results should show that “PCs are of low and
shrinking importance to Dell, whereas most of Dell’s value comes from its
healthy, growing Enterprise segment.”
Instead of transferring the “risk” of the company’s transformation to the
buyout group, Southeastern feels the deal should be classified as giving
the buyout group “the opportunity” of the transformation.
Dell spokesman wasn’t immediately available for comment Tuesday.
The stock rose a fraction in premarket trading to $14.04, adding to gains
above the agreed-upon buyout price of $13.65.
Dell’s fiscal fourth quarter, ended Feb. 1, showed a 31% drop in profits
and an 11% slide in revenue. The company said it would report its
results in different segments for the coming fiscal year, but not the
Southeastern also took issue with the buyout group’s use of Dell’s cash.
The shareholder said it has in the past been told Dell’s cash was
“trapped” overseas and unavailable for shareholders. That led it to be
“surprised” that Dell’s “long-standing position” had switched in order to
fund the deal. Mr. Dell and Silver Lake have said they plan to use up to
$8.4 billion of Dell’s overseas cash, repatriating it for the $24.4
more equitable approach would have returned the cash to all shareholders
instead of using it to fund the proposed buyout at the expense of other
shareholders,” Southeastern said.
The investor, which holds 8.4% of shares, though a smaller voting
percentage, had said last month that it believed Dell’s buyout undervalued
the stock and that Dell could have used the cash to pay shareholders a
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