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Another investor slams Dell buyout deal

February 12, 2013|By Andrea Chang
  • Investors are slamming a proposed leveraged buyout of Dell Inc. led by Michael Dell, the computer maker's founder and chief executive.
Investors are slamming a proposed leveraged buyout of Dell Inc. led by Michael… (Paul Hilton / Bloomberg…)

Another large investor has lashed out against the proposed leveraged buyout of Dell Inc., saying the deal led by founder Michael Dell undervalues the computer maker.

“We believe the proposed buyout does not reflect the value of Dell and we do not intend to support the offer as put forward,” Brian Rogers, chairman and chief investment officer of T. Rowe Price, said in a statement Tuesday.

T. Rowe Price controlled 4.4% of Dell shares as of Sept. 30, according to data from Thomson Reuters.

The firm is the latest investor that has expressed doubts about the $24.4-billion deal that was announced a week ago. On Friday, Southeastern Asset Management, Dell’s largest outside shareholder, said in a letter to Dell’s board that it would vote against the buyout.

“We are writing to express our extreme disappointment regarding the proposed go-private transaction, which we believe grossly undervalues the company,” Southeastern, which holds about 8.5% of Dell’s outstanding shares, said in the letter. “We also write to inform you that we will not vote in favor of the proposed transaction as currently structured.”

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The firm said it would look at “all options are our disposal” to oppose the bid, including a proxy fight and litigation claims.

According to Reuters, three other major shareholders are also expected to oppose the offer.

A week ago, Dell of Round Rock, Texas, announced it would be be acquired by Michael Dell and global technology investment firm Silver Lake. Microsoft Corp. said it would invest $2 billion in the deal, a move the Redmond, Wash., company said it was undertaking to help support “the long-term success of the entire PC ecosystem.”

It is the biggest leveraged buyout since the recession.

Michael Dell currently holds about a 16% stake in the company, which he has been trying to turn around amid a slump for PCs.

Dell stockholders will receive $13.65 in cash for each share of Dell common stock they hold, representing a premium of 25% over Dell's closing share price of $10.88 on Jan. 11, the last trading day before rumors of a possible sale began. The buyers will acquire for cash all of the outstanding shares of Dell not held by Michael Dell and some other members of management.

Dell said its board of directors, acting on the recommendation of a special committee of independent directors, unanimously approved the agreement. The transaction is expected to close before the end of the second quarter of Dell's fiscal year.

The personal computer maker said it would solicit competing offers.

In 1984, when he was 19, Michael Dell started PCs Limited in his University of Texas-Austin dorm room with $1,000. The company would go on to become Dell.

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