One of Dell's largest shareholders has reiterated its opposition to Michael Dell's attempts to regain ownership of the company, claiming the eponymous CEO has provided "no sound reasoning" for the deal.
In an open letter to the Dell board and the Special Committee appointed to oversee the sale process, Southeastern Asset Management insinuates that while it may have worked "diligently", the committee has failed to "exercise proper business judgement".
Southeastern, which owns 8.4 per cent of the Texan vendor, points out that the company has repurchased $3.4bn (£2.2bn) of stock in the past two years at an average price per share of about $15.25.
"The same board that was confident with Dell buying its shares for $15.25 is now attempting to convince all shareholders that Dell's business is in such dire straits that they should take [the] $13.65 [offered by Michael Dell] and exit their investments. We believe the board's sudden rush to sell is triggered by one thing: Mr Dell's desire to buy," adds the letter.
The "voluminous proxy statement" filed in relation to Michael Dell's buyout offer is also criticised for how heavily geared it is towards the comparatively low-margin EUC client computing business, rather than the ESS enterprise infrastructure unit. This constitutes an attempt to justify the undervaluing of the company by Michael Dell and his buyout backers, claims Southeastern.
"Given this change in public positioning, Dell's shareholders should question why the board is suddenly focused on EUC, and not on ESS – which was previously believed to be the future of the business," says the letter.
Southeastern points out that EUC provides just 42 per cent of operating income, despite contributing 65 per cent of revenue. The letter adds that Dell has spent more than $13bn "on acquisitions of non-PC businesses which benefit from the very same cloud and mobility trends that are negatively impacting the PC business".
"Long-term owners such as Southeastern have supported Dell in its transformation into an enterprise solutions company, but are not being given the opportunity to participate in the return on that $13bn investment," says the letter.
The investment firm believes that Michael Dell and Silver Lake have offered no compelling arguments why the vendor should be returned to private ownership. The letter claims that just one page of the 270-plus-page proxy statement is "devoted to Mr Dell's plans for the company following the transaction".
"That single page is consistent with the company's prior public statements, and nothing about these plans requires that the company be private," says the letter. "We note that many companies, including IBM, were able to successfully transform their businesses as public companies."
The missive closes by imploring the Special Committee to give due consideration to the alternative offers on the table – from Carl Icahn and Blackstone – both of which it considers to be better options.
"We view these proposals as superior primarily because each offers shareholders the opportunity to remain owners of Dell while also offering a higher cash price to owners who choose to exit their investment," says the letter.
"Southeastern urges the Special Committee to negotiate and evaluate these alternatives in good faith, and to recognise that offering shareholders a choice is a win/win outcome for all parties. We call upon the Special Committee to work hard to make this possibility a reality."
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