Southeastern Asset Management, the largest outside shareholder of Dell (DELL), continues to press its case as to why the founder-led buyout of the Texas-based computer maker shouldn't proceed as currently envisioned.
The firm, which oversees more than 8% of Dell's stock, previously has said it believes the shares are worth a price approaching $24 apiece. Now Southeastern has released a letter it sent to the special board committee that's running the merger process, further explaining why it feels the deal is subpar.
"According to the proxy statement, [company founder Michael] Dell notified the Board of his intention to take the Company private in August 2012," the letter, dated Tuesday, April 9, states. "The proxy statement clearly shows that, in their review, the Special Committee and Board of Directors reached conclusions that stand in stark contrast to views held by the Board prior to August 2012. While the Special Committee may have worked diligently and was assisted by credible and reliable professionals, even a good process -– without the exercise of proper business judgment –- can result in a bad transaction."
Southeastern was one of the early opponents of the plan by Michael Dell and Silver Lake Partners to acquire the company for around $24 billion, or $13.65 a share. The Memphis-based firm says, that in the past two years, Dell bought back nearly a quarter of a billion of its shares at an average of $15.25 each, something that Southeastern contends bolsters its position here.
"The same Board that was confident with Dell buying its shares for $15.25 is now attempting to convince all shareholders that Dell's business is in such dire straits that they should take $13.65 and exit their investments," the letter reads. "We believe the Board's sudden rush to sell is triggered by one thing: Mr. Dell's desire to buy."
Michael Dell, who started the company while a University of Texas college student in 1984, is the largest shareholder overall.
Southeastern said that, while analyzing Dell in order to arrive at a takeover price, significant errors in judgment were made about the company's prospects.
"[T]he proxy statement and the analysis performed by the Special Committee focus disproportionately on the End User Computing (EUC) business while giving little attention to the Enterprise Storage and Services (ESS) business," the firm says. "Southeastern's in-depth analysis indicates that at the completion of the Company's transformation to ESS, Dell's future owners should realize valuation multiples significantly higher than those reflected in the current offer price."
Along with Southeastern, T. Rowe Price and Pzena Investment Management are prominent Dell investors who have expressed their displeasure with the price. More recently, those critics have been joined by Carl Icahn, who this year has amassed a stake of around 4.6% in Dell. Icahn is offering his own takeover plan for Dell, as is Blackstone (BX).
Southeastern acknowledged the two alternate bids in its letter, saying it sees both as better options to what's on the table.
"We view these proposals as superior primarily because each offers shareholders the opportunity to remain owners of Dell while also offering a higher cash price to owners who choose to exit their investment," the letter states.
Shares of Dell recently were up 3 cents to $14.23. The stock's highest close since the acquisition was announced Feb. 5 is $14.51.