Debate over fairness of Dell valuation


For Michael Dell, the writing is on the wall. His effort to take his computer company private, the one he famously founded in his dorm room in college, will not occur without opposition. A big debate has already broken out about whether the $24.4 billion deal ($13.65 a share) is fair to shareholders not named Michael Dell. Much of the news surrounded Southeastern Asset Management, the largest outside shareholders, which has indicated it will fight the deal.

But others seem to be willing to join the cause.

CRN quoted on portfolio manager who said, "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...It's really just a transfer of value from shareholders to Dell and Silver Lake. It's a self-dealing offer."

Self-dealing! Such rhetoric is common in these sorts of transaction. Still, the urgency is palpable. At least two law firms are already girding to file class-action suits.

So is the offer from management fair?

Wells Fargo analyst Maynard Um recently put fair value of a Dell leveraged buyout at roughly $15 per share, nearly 10% higher than the actual deal.

"We believe this would be a fair deal for equity shareholders given the continued lackluster stock performance and few, if any, near-term catalysts to realize a comparable price," Um wrote to clients, as noted by And Raymond James analyst Brian Alexander has noted to clients that "an offer price in the $14-$16 range would be reasonable, based on his math."

All that said, it's unlikely that a higher offer will materialize in the 45-day go-shop period. This ultimately may end up as a courtroom drama instead of a bidding war.

For more:
- here's the CRN article
- here's the article in

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