Dell Shareholders Want To Know: Is $24.4B Enough?


Dell's leveraged buyout of $13.65 per share offers investors a 25 percent premium over what the stock was trading at four weeks ago and a 37 percent premium compared with three months ago.

But is it enough?

Some shareholders believe Dell should have paid them a higher price, especially since it had so much cash on hand and wasn't being acquired by another company.

Transactions of this magnitude -- and notoriety -- typically draw increased interest from shareholders, as well as law firms that specialize in class-action lawsuits seeking additional remuneration.

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Several law firms have said they plan to investigate Dell's board for possible breaches of fiduciary duty in connection with Dell going private through a $24.4 billion buyout with Silver Lake Partners, Microsoft and others.

"The investigation concerns, among other things, whether the consideration to be paid to Dell shareholders is unfair, inadequate, and substantially below the fair or inherent value of Dell stock. In particular, at least one analyst set a price target for Dell stock at $16.00 per share," said one of those law firms, Levi & Korsinsky, in a statement.

Investor Wayne Jervis, managing partner of Jervis Alternative Asset Management (Jaamco), a Greenwich, Conn.-based firm, believes Dell should have offered shareholders a significant dividend and explored a leveraged recapitalization, which is used as a means of refinancing, often to provide cash to the shareholders while not requiring a total sale of the company.

"I'm fed up about the offer. I thought the [rumored] price [of up to $16 per share] going into Friday was good. I've been a long-term shareholder and I'm tired of these management 'buy-unders' crammed down shareholders' throats," Jervis said. "It's really just a transfer of value from shareholders to Dell and Silver Lake. It's a self-dealing offer."

Under the terms of the transaction, Dell stockholders would receive $13.65 per share. The Dell board voted on the price on the recommendation of a special committee of independent directors. Dell had formed the special committee in August after Michael Dell approached the board about taking the company private.

The special committee, led by lead director Alex Mandl, retained J.P. Morgan and Debevoise & Plimpton to explore strategic alternatives, the acquisition proposal and negotiation of the agreement, according to Dell, Round Rock, Texas.

The deal provides for a 45-day "go-shop" period in which the special committee can solicit, receive, evaluate and consider alternative proposals, according to the company.

Following that 45-day period, the special committee can continue discussions and enter into or recommend a transaction with any person or group that submitted a qualifying proposal during the 45-day period, according to Dell.

Any successful competing bidder who makes a qualifying proposal during the initial go-shop period would bear a $180 million (less than 1 percent) termination fee, according to Dell. Any competing bidder who did not qualify during the initial go-shop period would face a $450 million termination fee.

Dell expects the transaction to close before the end of its second quarter.

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