In the Dell situation, Barron’s this week points out that one firm, one that apparently initially paid much higher prices for some of the shares it owns above $20 per share, is insisting that even if you only value the PC business at $2.78 per share, they constructed a sum of the parts value for Dell at $23.72 per share. In the Dell case, the original firm that broached the idea of going private with Michael Dell last summer was frozen out of the deal. In the literally 1000 pages of documents filed in the proxy statement, Mr. Dell told Southeastern Asset Management that he would consider the idea. He surely did but used their concept to proceed with Silver Lake Partners and not Southeastern. This is the big leagues and when it comes to doing what is best for MOI, Mr. Dell chose to take Southeastern’s concept and rework it to suit himself, leaving them out in the process. Barron’s suggests that with Carl Icahn and Blackstone Group now in the bidding the plot has thickened a bit. You can regard the Blackstone offer as the Trojan Horse bid as the recently departed head of Dell’s acquisition strategy is now at Blackstone and spearheading that effort. He knows what is there to buy better than most.
Barron’s cover story this week suggests that Michael Dell and friends aren’t likely to be able to steal the company at $13.65. That’s close to half its estimated present value with little included for the crumbling PC business. On the other hand, it is noteworthy that none of the other offers rise to a price consideration that is much higher than the $13.65. Besides all those massive fees that the deal machinery on Wall Street stand to make over this particular one, the bidding investors must see still see a sizeable return to make it worth their interest. Whether Micheal Dell has the skills or not to lead the company going forward also remains to be seen. Nothing he’s done in recent years has provided the magic formula which is why we are at this particular Dell crossroads.
Sure, and there is quickly news to follow that M Dell could be a seller. If he gets less than the average cost basis and is up by 150% of his bid, then he should call a bluff and pull the trigger at or above $20... $$18 is a contender i think.
It's the difference between a CEO or very upset 14% shareholder of a public stub and a guy who once built and held stock in DELL.
Kind of makes sense if that valuation should hold, then hey! Why not sell and restart or retire?
What do you think?
Southeastern paid $20 to $40 per share for much of their Dell stake. Like many of the stocks they own, Southeastern paid way too much.
Naturally, Southeastern believes DELL, and all the other stocks they overpaid for, is worth double current trading price. The "analysis" Southeastern does for stocks is absurd, and the primary reason Southeastern is such a well known bag holder of underperforming stocks.
Hope this helps.
Bashy, even my limpin' butt learned about sum of the parts analysis.. and that was like the first class on M&A. IDK. The valuation is legit, just noone dying to pay what the did right now. Then we ask, what is the next lower cost basis for an major active shareholder?
Good luck bashford.
We all know where Southeastern stands. I have sold all of my Dell in the mid $14's. After reading your many posts on here I am puzzled what your position is - Clearly not long but much of what you have said also doesn't make sense if you are short. Just curious.