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Dell buyout deal draws fire

Key shareholder warns of mutiny at $24.4 billion price

– Dell Inc.’s decision to sell itself for $24.4 billion to a group led by its founder and CEO is being ridiculed as a rotten deal by a major shareholder who estimates the slumping personal computer maker is really worth more like $42 billion.

The missive launched Friday by Southeastern Asset Management Inc. threatens to complicate Dell Inc.’s efforts to end its 25-year history as a public company.

In a letter to Dell’s board of directors, Southeastern CEO O. Mason Hawkins threatened to lead a shareholder mutiny unless the company came up with an alternative to the deal announced earlier this week.

Hawkins vowed to wield Southeastern’s 8.5 percent stake to thwart the deal currently on the table. Only Michael Dell, the company’s eponymous founder and CEO, owns more stock with a roughly 14 percent stake.

Under Dell’s proposal, Southeastern and other stockholders will be paid $13.65 a share to leave the company in control of Michael Dell, who founded the business in his University of Texas dorm room in 1984. Michael Dell is contributing about $4.5 billion in stock and cash to help pay for the deal. The rest of the money would be supplied by the investment firm Silver Lake, loans from Microsoft Corp. and a litany of banks. The loans will burden Dell with debts that could leave the company with less money to invest in innovation and acquisitions.

Hawkins derided the price as “woefully inadequate” and laid out a scenario that values Dell at $23.72 a share, or about $42 billion. The per-share amount mirrors Dell’s stock price six years ago, when Michael Dell returned for a second go-round as the company’s CEO.

A Dell spokesman declined to comment Friday.

The company, based in Round Rock, Texas, has previously said that Michael Dell recused himself from all discussions about the proposed deal to take the company private. The board has also said it explored a range of alternatives before agreeing to sell the company for $24.4 billion – a price 80 percent below Dell’s top market value of more than $150 billion at the peak of the dot-com boom 13 years ago.

Michael Dell and Silver Lake contend the company will be in a better position to overhaul its operations as a privately held company. That’s because Dell would be able to make dramatic changes without having to worry about Wall Street’s fixation on whether earnings and revenue are growing from one quarter to the next.

Dell’s shares rose 10 cents Friday to close at $13.63.

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