SAN FRANCISCO -- The committee of Dell board members that oversaw the negotiations to sell the slumping personal computer maker for $24.4 billion is standing behind the deal despite the misgivings of major shareholders who believe CEO Michael Dell and other investors buying the company are getting a bargain.
In a four-paragraph statement released Wednesday, the four Dell directors on the committee provided their most extensive defense of the deal since it was announced a month ago.
Although much of the information contained in the statement had already been disclosed, the directors' decision to publicly reiterate their rationale for agreeing to the deal currently on the table shows they aren't having any second thoughts even as the company's largest independent shareholder prepares to lead a possible shareholder.
Southeastern Asset Management, which owns an 8.4 percent stake in Dell Inc., has demanded the names of other shareholders. That information could be used to rally opposition to the deal. T. Rowe Price, which owns a nearly 5 percent stake in Dell, also is lobbying against the deal.
Dell's special committee said it went through a "rigorous" five-month review before accepting an offer to sell the company to founder Michael Dell and a group of investors led by Silver Lake for $13.65 per share. Although that's about $10-per-share below where the stock stood when Michael Dell returned for a second stint as CEO in 2007, it's 37 percent above the shares' average trading price during the 90-day period before word of the buyout negotiations leaked out in mid-January.
Southeastern contends Dell is worth nearly $24 per share.
Before accepting the $13.65-per-share offer, the special committee said it considered a variety of other options. The alternatives included revising the company's plan to diversity beyond PCs, adopting a different dividend policy and breaking up the company so its operations could be sold in parts. The committee said it reached in consultation of experts that included investment bankers from JP Morgan.
Shareholder Forum, a group that seeks to protect that shareholder interests, wants access to the same information that influenced Dell's special committee to sell at $13.65 per share. The information would be used by experts to perform an independent evaluation of the proposed sale to help shareholders understand if it's the best choice, according to a Tuesday letter sent to Michael Dell by Gary Lutin, a former investment banker who runs the Shareholder Forum. Lutin said the Shareholder Forum is acting as a delegate of a Dell shareholder who wasn't identified in the letter. In an email, Lutin said the Shareholder Forum isn't working in concert with Southeastern Asset.
If the second-guessing about the proposed sale of Dell continues to mount, the spotlight on the board's special committee is likely to intensify. The committee is chaired by Alex Mandl, a former telecommunications executive. The three other committee members are: Laura Conigliaro, a former computer industry analyst for Goldman Sachs; Ken Duberstein, who was President Ronald Reagan's chief of staff before starting his own consulting firm; and Janet Clark, the chief financial officer of Marathon Oil Corp.
The special committee was formed last August after Michael Dell notified the Round Rock, Texas, company that he was exploring a buyout bid in partnership with other investors. Michael Dell has agreed to contribute 273 million of the company stock that he controls and $750 million in cash to help finance the buyout, which rely primarily on loans from PC software maker Microsoft Corp. and an assortment of banks.
Michael Dell is trying to reduce the company's dependence on PCs, which are becoming tougher to sell as more people switch over to smartphones and tablet computers. He believes the company can thrive again by expanding into business software, data analytics and storage and other more profitable niches in technology -- a transition that Michael Dell believes will be easier without having to worry about the short-term financial interests of Wall Street. If the current agreement is approved, Dell will end its 25-year history as a publicly traded company.
In an attempt to avoid allegations that it was biased toward Michael Dell's offer, the special committee has left open the door for a higher bid. The committee said it has provided financial incentives for investment banker Evercore Partners to find a better deal by March 22. If another enticing proposal surfaces, the special committee said it will negotiate past the March 22 deadline.
The special committee said it "has worked hard, and continues to work hard to produce the best outcome for Dell's shareholders."
Many investors are betting the pot will have to be sweetened to get a sale completed. Dell's stock was down 2 cents at $14.05 in afternoon trading Wednesday. They have traded in a 52-week range of $8.69 to $17.46 over the past year.