Dell CEO May Get 50% Return on Buyout, Investor Says
By Aaron Ricadela & Serena Saitto - Jun 27, 2013 7:17 PM ET
Dell Inc. (DELL) Chief Executive Officer
Michael Dell may generate an annualized return of more than 50 percent
on his investment if he succeeds in taking the computer maker private, an
investor opposed to the deal said.
The CEO could realize an
annualized return of as much as 50.1 percent during the next four to five
Silver Lake Management LLC, his partner, could earn as much as 44.7
percent annually over the same period, Southeastern Asset Management Inc.
said in a presentation filed with the
Securities and Exchange Commission.
Those rates of return are higher than shareholders could achieve under the
terms of the leveraged buyout, whereby Dell and Silver Lake have agreed to
pay stockholders $13.65 a share, Southeastern said in the presentation.
The investment firm held about 4.1 percent of Dell stock, as of June 18,
according to Bloomberg data.
Southeastern, which previously
said Dell is worth $24 a share, may have locked in a loss of $225 million
after recently selling 71.7 million Dell shares at $13.52 apiece to fellow
Carl Icahn. It had paid $2.4 billion to acquire 146.1 million shares,
according to earlier regulatory filings, indicating its cost was about
$16.66 a share.
“The board could have done more -- much more -- to afford stockholders an
opportunity to achieve the very same gains now pursued by Michael Dell and
Silver Lake,” the Memphis, Tennessee-based firm, run by O. Mason Hawkins
and Staley Cates, said nonetheless.
Southeastern is teaming with Icahn to oppose Michael Dell and Silver
Lake’s $24.4 billion buyout ahead of a vote at a special meeting set for
July 18 at Dell’s Round Rock, Texas headquarters. Icahn, in his third push
to seek a bigger payout for shareholders, is proposing a deal that asks
Dell to tender 1.1 billion shares at $14 apiece and which would retain the
company’s public listing.
March, Icahn offered $15 a share in cash for as much as 58.1 percent of
the stock. Then, in May, he partnered with Southeastern to offer investors
$12 a share in cash or additional Dell stock while letting them retain
stakes in a public company. All his offers so far weren’t fully financed
and Dell’s special committee of the board has urged shareholders to vote
for founder Michael Dell’s buyout at the July 18 meeting.
Icahn and Southeastern view Dell’s buyout offer as being at a
‘‘substantially undervalued’’ price, the investor said in the
presentation. Hawkins made similar arguments in a letter to Dell
shareholders filed with the SEC yesterday.
Evercore Partners Inc. (EVR), the advisory firm hired by Dell,
estimated the investment returns for Michael Dell and Silver Lake, based
on projections by Boston Consulting Group Inc., Southeastern said. Dell
plans to invest his 15.6 percent stake in the company and an additional
$750 million in cash to take the company private.
Dell and Silver Lake’s offer represents a premium of 25 percent over the
computer maker’s closing share price of $10.88 on Jan. 11, the last
trading day before news of a deal was first reported.
spokesman for the special committee of Dell’s board handling the merger
agreement declined to comment.
Dell slipped less than 1
percent to $13.34 at the close in
New York. The stock has gained 32 percent this year through today
compared with a 13 percent gain for the Standard & Poor’s 500 Index.
To contact the reporters on
this story: Aaron Ricadela in
San Francisco at
To contact the editor
responsible for this story: Pui-Wing Tam at
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