Southeastern Requests Dell Shareholder List to Talk LBO
Southeastern Asset Management Inc., the investor opposing a proposed $24.4 billion leveraged buyout of Dell Inc., requested the names and addresses of other shareholders to discuss the deal.
Southeastern, the largest outside shareholder of Dell with an 8.4 percent stake, submitted the demand notice on behalf of its $7.7 billion Longleaf Partners Fund (LLPFX), according to a filing today with the U.S. Securities and Exchange Commission. The filing included a March 5 letter to the computer maker’s board that reiterates Southeastern’s objections to the deal.
Southeastern is leading opposition to the buyout by founder Michael Dell and Silver Lake Management LLC, saying the offer of $13.65 a share announced Feb. 5 undervalues the company. T. Rowe Price Group Inc., the Baltimore-based mutual-fund company and second-largest outside investor in Dell, and Richard Pzena, founder of money manager Pzena Investment Management Inc. (PZN), also said they oppose the deal.
“The board of directors characterizes the proposed transaction as a transfer of ‘the risk of the business to the buyout group,’” O. Mason Hawkins and Staley Cates, the top officers at Memphis, Tennessee-based Southeastern, said in the March 5 letter. “We believe it is more appropriately characterized as a transfer of ‘the opportunity of the business to the buyout group,’” they said in the letter.
“The company will review the request by Southeastern Asset Management for Dell stockholder lists and other shareholder- related information and respond in a timely fashion,” David Frink, a spokesman for the Round Rock, Texas, computer maker, said in an e-mailed statement.
Southeastern’s principals have vowed to use all options at their disposal to block the buyout, including a potential proxy fight or litigation. Southeastern estimated in a filing last month that Dell is worth about $24 a share.
Hawkins and Cates also said in their letter that Dell has long refused to distribute its cash held overseas to shareholders, citing the taxes it would incur in repatriating the money. The investors said they were “surprised” to see this position change after Silver Lake and management announced that the overseas cash would be brought home to finance the buyout.
Teaming up with other investors could help Southeastern coordinate a vote against the deal. The amount of Dell shares Hawkins and Cates can vote is lower than the number of shares they hold.
Southeastern’s 8.4 percent stake includes options on 25 million shares that the fund acquired for $8.52 each. To purchase the stock and gain the related voting rights, Southeastern would have to pay an additional $7 a share, bringing its total cost to $15.52 a share. That would be more than Dell has offered to pay in the buyout.
In addition, Southeastern doesn’t control the voting rights for another 16.9 million Dell shares held on behalf of clients. When these shares and the options are deducted from Southeastern’s holdings, the money manager has the right to vote about 6 percent of Dell’s stock.
In the demand for Dell’s shareholders list, Southeastern requested the names and addresses of employees who hold stock through various compensation and share-ownership plans. Southeastern also demanded information on share ownership that comes into Dell’s transfer agent, proxy solicitor, or any information that can be reasonably obtained from brokers, banks and clearing agencies. Southeastern also said it wanted a weekly update on any changes to the information provided.
“The purpose of this demand,” Southeastern said in the notice, is to communicate with other Dell (DELL) investors on “matters reasonably relating to the stockholder’s interests,” including the proposed buyout.
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