The Dell Inc. committee that negotiated the slumping PC maker's $24.4
billion buyout is standing behind the deal despite the misgivings of
major shareholders who believe the price is too low.
four-paragraph statement released Wednesday, the four directors who
oversaw the discussions to sell Dell provided their most extensive
defense of the deal since it was announced a month ago.
Michael Dell, backed by other investors led by investment firm Silver
Lake, is trying to buy out the company he founded for $13.65 per share.
of the information in the statement had already been disclosed. The
directors' decision to publicly reiterate their rationale for agreeing
to the deal currently on the table suggests that they aren't having
second thoughts. It comes as Dell's largest independent shareholder
prepares to lead a possible mutiny.
Southeastern Asset Management,
the investment firm that owns an 8.4 percent stake in Dell Inc., has
demanded the names of other shareholders. That information could be used
to rally opposition to the deal. Mutual fund manager T. Rowe Price,
which owns a nearly 5 percent stake in Dell, also is lobbying against
Those critics may soon be joined by another nettlesome
investor, billionaire Carl Icahn. He specializes in buying out-of-favor
stocks and then pressuring corporate boards to make deals or other moves
to boost the share price.
Citing unidentified sources, financial
news channel CNBC reported Wednesday that Icahn has been accumulating up
to 100 million shares of Dell stock - an amount that would give him a
roughly 6 percent stake in the company. Icahn didn't immediately return
phone messages Wednesday.
CNBC's sources said Icahn wants Dell to
pursue other options besides a sale, including paying a special one-time
dividend to current shareholders.
That's one of the alternatives
that Dell's special committee said it already considered during a
"rigorous" five-month review. That analysis culminated in an agreement
to sell the company to Michael Dell and the investment group for the
That's 37 percent above the shares'
average trading price during the 90-day period before word of the buyout
negotiations leaked out in mid-January. But the stock stood $10 higher,
at about $24 per share, when Michael Dell returned for a second stint
as CEO in 2007. That's the price Southeastern contends Dell is worth.
investors are betting the pot will have to be sweetened to get a deal
done. Dell's stock rose 25 cents, or nearly 2 percent, to close
Wednesday at $14.32. The shares have been trading above the current
buyout offer for the past three weeks.
Before accepting the
$13.65-per-share offer, the special committee said it considered a
variety of other options. Besides a one-time dividend, these
alternatives included revising the company's plan to diversity beyond
PCs and breaking up the company so its operations could be sold in
parts. The committee said it reached its decision in consultation with
experts that included investment bankers from JP Morgan.
Forum, a group that seeks to protect shareholder interests, wants
access to the same information that influenced Dell's special committee
to sell at $13.65 per share. The information would be used by experts to
perform an independent evaluation of the proposed sale to help
shareholders understand if it's the best choice, according to a Tuesday
letter sent to Michael Dell by Gary Lutin, a former investment banker
who runs the Shareholder Forum.
The group is acting as a delegate of an unidentified Dell shareholder, who Lutin says is not Southeastern Asset Management.
second-guessing of the Dell deal continues, the spotlight on the
board's special committee is likely to intensify. The committee is
chaired by Alex Mandl, a former telecommunications executive. The three
other committee members are Laura Conigliaro, a former computer industry
analyst for Goldman Sachs; Ken Duberstein, who was President Ronald
Reagan's chief of staff before starting his own consulting firm; and
Janet Clark, the chief financial officer of Marathon Oil Corp.
special committee was formed last August after Michael Dell notified
the Round Rock, Texas, company that he was exploring a buyout bid in
partnership with other investors. Michael Dell has agreed to contribute
273 million of the company stock that he controls and $750 million in
cash to help finance the buyout, which rely primarily on loans from PC
software maker Microsoft Corp. and an assortment of banks.
Dell is trying to reduce the company's dependence on PCs, which are
becoming tougher to sell as more people switch over to smartphones and
tablet computers. He believes the company can thrive again by expanding
into business software, data analytics and storage and other more
profitable niches in technology - a transition that Michael Dell
believes will be easier without having to worry about the short-term
financial interests of Wall Street. If the current agreement is
approved, Dell will end its 25-year history as a publicly traded
In an attempt to avoid allegations that it was biased
toward Michael Dell's offer, the special committee has left open the
door for a higher bid. The committee said it has provided financial
incentives for investment banker Evercore Partners to find a better deal
by March 22. If another enticing proposal surfaces, the special
committee said it will negotiate past the March 22 deadline.
special committee said that it "has worked hard, and continues to work
hard to produce the best outcome for Dell's shareholders."