Does Michael Dell Have the Cash to Quell a Shareholder Revolt?

NEW YORK (TheStreet) - Dell's (DELL) two largest independent shareholders now oppose the company's $24.4 billion takeover deal, indicating a brewing investor revolt to the buyout orchestrated by founder and chief executive Michael Dell.

As shareholders voice discomfort at the price tag attached to Dell's take-private bid, it might be time for Michael Dell to consider putting up more cash to regain control of the company he founded in the mid 1980's.

For instance, a Tuesday morning analysis by Jefferies analyst Peter Misek indicates that the proposed $13.65 a share transaction could be raised as high as $15 a share, given the high multiples Michael Dell and his buyout partners could return in the proposed deal.

On Friday, Southeastern Asset Management, Dell's top independent shareholder with a near 8.5% stake, said it would oppose the deal, citing a low-priced bid that it says undervalues the company by roughly $10 a share.

Now, amid unrest by other investors, T. Rowe Price, Dell's third largest shareholder, also says it will oppose the deal.

"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 Price Chairman and CIO, said in an e-mailed statement. T. Rowe Price holds roughly 4.4% of Dell's outstanding shares, according to filings with the Securities and Exchange Commission.

The growing discontent to the leveraged buyout announced on Feb. 5 indicates that Dell's founder and a buyout consortium that also includes private equity giant Silver Lake Partners will have work to do before the deal goes to a shareholder vote.

Prior to T. Rowe Price's opposition to the take-private deal, signs already pointed to a protracted shareholder battle. On Tuesday, Southeastern Asset Management said in a filing that it had hired proxy solicitor D.F. King to help make the case that the planned deal undervalues Dell significantly.

In a Friday filing, Southeastern valued Dell at about $24 a share, while also indicating that the company has multiple options at creating value for shareholders, who have suffered from the company's 20%-plus one-year share losses.

"[Our] value for the entire Company is approximately $24.00 per share, but we also believe that selling multiple business units to strategic buyers could easily exceed $13.65 per share," wrote Southeastern in the Friday filing. Other alternatives include asset sales, or a special dividend it said could reach nearly $12 a share.

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