Southeastern Loses About $225 Million Selling Dell Shares

Southeastern Asset Management Inc., the investment firm that said Dell Inc. (DELL) is worth $24 a share, may have locked in a loss of $225 million by selling half of its stake to fellow dissident Carl Icahn at a lower price.

The Memphis, Tennessee-based firm, run by O. Mason Hawkins and Staley Cates, agreed to sell 71.7 million Dell shares to Icahn at $13.52 each, according to a Schedule 13D filed yesterday with the U.S. Securities and Exchange Commission. The firm 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 price Icahn paid is 1 percent below the $13.65 a share that Michael Dell, the company’s chairman and chief executive officer, has offered stockholders in a leveraged buyout. When the buyout was announced in February, Southeastern sent a letter to Dell’s board expressing “extreme disappointment” with the bid, saying it “grossly undervalues” the computer maker.

The investment firm, which held an 8.5 percent stake at the time, later teamed with Icahn to formulate a rival offer that would maintain Dell’s status as a publicly traded company. Icahn issued a letter yesterday urging Dell to repurchase company stock, in part with financing he would provide, as an alternative to the CEO’s buyout.

Southeastern, whose mutual funds include the $7.7 billion Longleaf Partners Fund (LLPFX), continues to hold 71.7 million Dell shares. Its cost basis in the remaining stake equals about $14.98 a share, according to yesterday’s filing.

Southeastern started buying Dell stock in the third quarter of 2005 and built its stake to 130.9 million shares by the middle of 2007, when the price ranged from $19.91 to $41.54 a share. Southeastern’s stake varied in size after that, reaching a high of 168 million shares at the end of the first quarter of 2009, when the stock traded at an average price of $9.59 a share.

Icahn didn’t immediately return a telephone call seeking comment, nor did Lee Harper, a Southeastern spokeswoman.

To contact the reporter on this story: Miles Weiss in Washington at mweiss@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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