By Poornima Gupta
March 5 Dell Inc's largest external
shareholder is demanding that the PC maker open its books,
signaling it could become more active in opposing founder
Michael Dell's proposal to take the company private for more
than $24 billion.
Southeastern Asset Management, the largest of a clutch of
investors who say the buyout proposed by Dell and private-equity
house Silver Lake sharply undervalues the world's No. 3 PC
maker, called for "straightforward information" on behalf of its
top client, Longleaf Partners Fund.
The Memphis-based firm run by activist investor Mason
Hawkins also criticized the silence of Dell executives about the
deal during a February earnings call. In a letter to Dell
included with a Tuesday filing, the firm accused the company of
emphasizing a decline in PC sales, while ignoring growth in its
IT services division, to justify an inadequate buyout price.
"Under the current buyout proposal, management and Silver
Lake stand to receive all of the future upside, while denying
shareholders, who have paid to reposition the company, the
opportunity to reap the rewards of our investment," Southeastern
said in its filing.
Michael Dell, teaming up with Silver Lake and top global
software maker Microsoft Corp, is offering $13.65 a
share to buy out the company, but at least four of its largest
investors are opposed to the deal.
Shareholders representing almost 14 percent of Dell shares,
led by Southeastern with a stake of more than 8 percent,
including options, have said they will vote against the proposed
buyout. No. 3 shareholder T. Rowe Price has also spoken out
against the deal.
"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," Dell
spokesman David Frink said on Tuesday.
Michael Dell created the computer maker from his college
dorm room in 1984 and grew the company into a model of
innovation in the early 2000s for pioneering online ordering of
custom-configured PCs. But it missed the big industry shift to
tablets and smartphones and is now trying to reinvent itself as
a seller of services to corporations, an internal overhaul that
some analysts say might be better conducted away from public
Its billionaire founder now holds roughly 16 percent of the
company and needs a majority of shareholders - excluding himself
- to vote for the deal.
The founder and CEO did not join a management discussion of
quarterly financial results during a conference call with
analysts last month because of his participation in the buyout.
Dell executives also did not comment on the buyout.
The company also declined to provide any financial forecast
for fiscal 2014 or the fiscal first quarter, citing the proposed
buyout, and it changed the way it reported the financial results
Southeastern has suggested several alternatives it says
would produce a better outcome for public shareholders. Dell
could borrow money to make a major share repurchase, or the
company could be broken up and the units sold separately.
Another approach would have been to return Dell's growing
overseas cash reserve to all shareholders instead of using it to
fund the proposed buyout at their expense, the fund added in its
Dell shares closed up 7 cents at $14.07 in afternoon
trading, about 3 percent above the $13.65 offer price.
Since news of the proposed buyout emerged in January, the
stock has gained over 30 percent, a rally that analysts say
might evaporate if the deal falls through.
Dell has said it plans to file a proxy statement with the
U.S. securities regulators on the merger agreement.