Dell Board Defends Buyout Amid Mounting Investor Resistance

Dell’s Board Actively Soliciting Alternate Buyout Offers
Dell Inc. signage is displayed outside of the company's headquarters in Austin, Texas. Photographer: Sam Hodgson/Bloomberg

Dell Inc.’s board committee, facing mounting investor resistance to a $24.4 billion leveraged buyout, said it “negotiated aggressively” to secure the best price and would extend the period for soliciting higher bids if a superior proposal emerged.

Before agreeing to go private, Dell also considered options including a leveraged recapitalization, changing the dividend policy and shedding some business units, the committee said today in a statement. Evercore Partners Inc., serving as financial adviser, is seeking other bids in a so-called go-shop period that concludes March 22.

Opposition has been gaining steam among some of Dell’s biggest investors since the company said last month that it agreed to a $13.65-a-share buyout by founder Michael Dell and private-equity firm Silver Lake Management LLC. The deal -- which requires approval from a majority of shareholders excluding Michael Dell -- has been opposed by holders including Southeastern Asset Management Inc. and T. Rowe Price Group Inc.

“There are some disgruntled shareholders and they think Michael Dell is kind of bullying them around,” Angelo Zino, an analyst at Standard & Poor’s, said in an interview. “Dell, by putting this statement out, is kind of digging their heels in the ground.”

Dell’s shares fell less than 1 percent to $14.04 at 9:31 a.m. in New York. Through yesterday, the stock had declined 18 percent in the past year, compared with a 13 percent gain for the Standard & Poor’s 500 Index.

Southeastern Resistance

Southeastern, Dell’s largest outside shareholder with an 8.4 percent stake, yesterday requested the names and addresses of other shareholders to discuss the deal. Southeastern has vowed to use all options at its disposal to block the buyout, including a potential proxy fight or litigation. Southeastern estimated in a regulatory filing last month that Dell is worth about $24 a share.

T. Rowe, the second-biggest outside investor in Round Rock, Texas-based Dell, has also voiced opposition.

“We believe the proposed buyout does not reflect the value of Dell and we do not intend to support the offer as put forward,” T. Rowe Price Chairman Brian Rogers said in an e-mailed statement last month.

Michael Dell and Silver Lake may need to raise the price to about $15 a share to win investor support, Abhey Lamba, an analyst at Mizuho Securities Inc., said in an interview.

“There will have to be some negotiations between the shareholders and the current buyout team,” Lamba said. “It would be hard to get a new offer from outside the current team. Whoever comes in would have to have Michael Dell on board.”

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