Opposition from major shareholders is growing to the proposed $24 billion buy-out for computer manufacturer Dell. The latest opposition comes from T.Rowe Price, Dell’s second largest investor on the heels of opposition by Southeastern Asset Management; Dell’s largest outside investor along with smaller investors. The protests are in relation to the offer of $13 a share offered by company founder Michael Dell and private equity firm Silver Lake Partners.
T. Rowe Price’s CIO stated that the proposed buyout doesn’t reflect the value of Dell and that was the main reason behind their opposition to the plan. Price’s ownership of 4.4 percent of Dell’s shares, valued at approximately $1 billion, along with the 8.4 percent owned by Southeastern form a major factor in opposition to the buy-out. That type of influence is reflected in the investor rejection to the premium the proposed buy-out represents with Dell’s recently beaten-down share price. Just recently Dell put the premium to shareholders at 37% based on average share price for the past three months. Even with Dell stock edging up to $13.78, investors are still angry that the offered price if far below the price one year ago of $18. Could the hold out suggest that Wall Street is expecting Dell and Silver lake to forcibly pay a higher price in order to win over support for the buy-out? Whatever the thinking is, the shares are most definitely far below the price of $23.72 that Southeastern claims they would be worth in the event of a company break-up.
In attempt to make their case to investors, Silver Lake and other deal supporters are arguing that without the buy-out Dell stock may sink to the low of $8 per share. This is based on the instance of shares dipping as low as $9 last November prior to a slight recovery coinciding with a Goldman Sachs research pointing out Dell’s potential value if it was bought out.
Some of the most vocal critics opposing the buy-out concede that given the tough turnaround the computer giant is facing, there is a very slim chance of getting more than the offered price per share from Silver Lake and Dell. A representative from Pzena Investment, owner of nearly 13 million Dell shares, was quoted as saying that most of the opposing shareholders evidently want more than $20 per share. The representative went on to say that given the mindset of the current buy-out group the deal probably will not go through. Does this mean the end of Dell?