T. Rowe Price Group Inc., the second-largest outside investor in Dell (Nasdaq: DELL), said it won’t support the proposed $24.4 billion buyout of the computer maker because it undervalues the company.
The news helped push Dell shares up 10 cents to $13.80 in noon trading Tuesday, 15 cents higher than the buyout offer.
“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, T. Rowe’s chairman and chief investment officer, said today in an e-mailed statement from Baltimore.
The largest investor already has expressed its opposition.
Southeastern Asset Management, which holds an 8.5 percent stake in Dell, on Feb. 8 sent a letter to Dell’s board expressing its “extreme disappointment” with the buyout offer of $13.65 a share announced on Feb. 5. Based on an analysis included in the letter, Southeastern said Dell is worth about $24 a share.
Dell shares on Monday closed above the offer price for the first time since the announcement after the computer maker’s largest outside shareholder said the proposed deal undervalues it.
Southeastern Asset Management, which holds an 8.5 percent stake in Dell, on Feb. 8 sent a letter to Dell’s board expressing its “extreme disappointment” with the buyout offer of $13.65 a share announced on Feb. 5. Based on an analysis included in the letter, Southeastern said Dell is worth about $24 a share.
Dell rose less than 1 percent to $13.70 at Monday’s close in New York, the highest price since May 2012. The buyout offer is 25 percent more than the closing price of $10.88 on Jan. 11, the last trading day before Bloomberg News reported the discussions to take the Round Rock, Texas-based company private.
The price improvement came after Dell tried to reassure shareholders, saying it considered a number of strategic options before agreeing to the deal.
Dell laid out the advantages of the transaction in a regulatory filing Monday, saying it determined with independent advisers that the cash bid by a group led by Michael Dell was in the best interests of stockholders.
Dell also said the deal allows time for alternate bids do that shareholders will be able to see if there are superior options available.
Dell said Monday that the deal “shifts the risks facing the business to the buyer group.”
The proposed $24.4 billion purchase price is 80 percent below Dell’s top market value of more than $150 billion at the peak of the dot-com boom 13 years ago. The $13.65 per share offer is 25 percent above where Dell’s stock stood last month, before word of the buyout negotiations leaked out in the media. Dell’s stock has plunged during the past year as PC sales have slumped amid the technological upheaval caused by the growing popularity of smartphones and tablet computers.
Chief Executive Officer Michael Dell is seeking to take back majority control of the company he founded in 1984 with a $24.4 billion offer in conjunction with Silver Lake Management LLC. In the letter, Southeastern said Dell’s business-computing acquisitions, along with its server and technology-services operations, are worth more than the offer.
“They’re probably going to sweeten it a little bit,” said Brian Marshall, an analyst at ISI Group in San Francisco, who has a neutral rating on Dell shares. “These deals aren’t usually inked on the first offer.”
Shareholder Questions
Richard Pzena, founder of Pzena Investment Management, has also said he’ll vote against the transaction. Pzena’s firm held 12.7 million Dell shares, or 0.7 percent of the company, as of Dec. 31, according to data compiled by Bloomberg. Donald Yacktman of Yacktman Asset Management said that the transaction may not go through at the current price, and Harris Associates LP’s William C. Nygren said Feb. 5 that he would create a “ruckus” if his firm were to find out that there were better alternatives than the deal that Dell’s board agreed to.
David Frink, a spokesman for Dell, said in an e-mailed statement last week that the proposed deal “offers an attractive and immediate premium for stockholders and shifts the risks facing the business to the buyer group.” A so-called “go-shop” period “provides stockholders an opportunity to determine if there are alternatives that are superior to the present offer,” he said.
(The AP and Bloombrg contributed to this report.)
