Struggling PC maker Dell Inc. is trying to reassure shareholders that its proposed $24.4 billion acquisition by a group led by founder Michael Dell does not undervalue the corporation.
On Feb. 6, Southeastern Asset Management Inc., the group lead by Michael Dell, proposed to buy the computer maker for $13.65 per share. The transaction would put the company back in the hands of Michael Dell, who founded the company in his University of Texas dorm room in 1984. On Feb. 11, one of Dell’s major shareholders objected to the buyout, saying the move undervalues the company.
Round Rock, Texas-based Dell, like many computer OEMs, has been struggling as PC sales have slumped amid the technological upheaval caused by the growing popularity of smartphones and tablets. PC sales in 2012 declined for the first time in 11 years, according to IHS.
The proposed $24.4 billion buyout price is 80 percent below Dell's top market value of more than $150 billion at the peak of the dot-com boom 13 years ago. Michael Dell – Dell’s largest shareholder with a 14 percent stake – is contributing about $4.5 billion in stock and cash to help pay for the deal. The rest of the money would be supplied by the investment firm Silver Lake, loans from Microsoft Corp. and a number of banks.
Although the loans will burden Dell with debts that could leave the company with less money to invest in innovation and acquisitions, proponents of the buyout say they examined other strategic options before proposing the deal.
Dell said in its filing that it determined with independent advisers that the cash bid by Southeastern Asset Management was in the best interest of stockholders. Dell also said the deal allows time for alternate bids so that shareholders will be able to see if there are superior options available.
