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Report: shareholder resistance to Dell privatization growing

updated 09:45 pm EST, Thu February 7, 2013

More than 20 percent of the company owned by new shareholders

According to a report on Reuters, several major shareholders and investment companies with money tied up in Dell stock are having issues with the terms of the deal offered to take Dell public. Southeastern Asset Management owns 7.5 percent of the company and has allegedly told the company that it is "disturbed" by the $13.65 per share offer, believing that the company is worth at least $20 per share despite recent stock pricing.

The pending deal must pass two hurdles -- regulatory agencies must approve the deal, and shareholders must vote to sell, with a simple majority required. Several major shareholders have expressed reservations about the deal, or outright said that they would vote against the offer.

Alpine Capital Research president Nick Tompras is voting against the deal with his two million shares said "let the fools sell low -- don't make us all fools." Schneider Capital Management President Arnie Schneider holds 350,000 shares and will also vote against the deal.

As rumors spread of the negotiations, event-driven funds and high-risk investors tossed money into the company. Such investors own slightly more than 20 percent of the company, and may be able to band together and hold out for a higher offer, seeking a better return on investment. Reuters' sources say that the buyout consortium including Silver Lake Partners, Microsoft, and Michael Dell have no plans to make a higher offer.

Southeastern Asset Management will lose at least $825 million if the deal completes. Chief Executive of Southeastern Mason Hawkins is likely to take any objections public. He has railed against mismanaged companies that his company has held stock in previously, including CEO misconduct with Cheseapeake Energy Corporation in 2012, and Olympus Corp's accounting scandal in 2011.

Electronista spoke with a private shareholder of Dell who owns just over 12,000 shares. She told us that she was receiving unsolicited emails and flyers through the mail petitioning her to vote either for or against the deal, with the majority of the mailings advocating against accepting the offer. She said that she was voting against the deal -- as she, and apparently many of her colleagues, felt that the deal benefitted Michael Dell and the private investment companies involved at the expense of the shareholders.

By Electronista Staff
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