Dell buyout proposal fails to impress shareholders
Founder and equity firm will have to sweeten bid to take over computer maker after two biggest outside investors reject their offer
Dell, the computer maker that agreed to a US$24.4 billion buyout this month, is coming under increased pressure to make the deal more attractive to shareholders who say the transaction undervalues the company.
Options include boosting the offer price or increasing the dividend.
Dell's biggest outside investors, T. Rowe Price and Southeastern Asset Management, oppose the US$13.65-a-share proposal, saying it undervalues the number-three maker of personal computers.
In the largest leveraged buyout since the financial crisis, founder Michael Dell and private equity firm Silver Lake Management seek to take Dell private after the company lost almost one-third of its value last year amid stiffening competition in mobile and cloud computing. The buyers need approval by a majority of shareholders, excluding Michael Dell, and their chances diminish as opposition gains momentum.
"I don't think the offer will get the shareholder vote, especially as the two largest shareholders have come out early and against," said Louis Meyer, an analyst at Oscar Gruss & Son.
Opposing investors would first push for a higher price, he said. Failing that, they would probably "press for some sort of recapitalisation, such as a special dividend".
Dell rose less than 1 per cent to US$13.79 in New York on Tuesday, the highest since last May. The buyout offer is 25 per cent higher than the US$10.88 closing on January 11, the last trading day before buyout talks became public.