Does Michael Dell Have the Cash to Quell a Shareholder Revolt?
Increasingly, analysts appear to see alternatives to Dell's prospective takeover, a deal that would amount to the biggest leveraged buyout since the financial crisis.
"If the LBO falls through, on a fundamental basis we think the stock could return to $10, however, DELL could undertake a leveraged recap. Using our assumption, we think a levered recap could lead to a $12-$12.50 stock," writes Misek of Jefferies in a Tuesday note to clients that stresses the possibility of a $15 a share deal.
As signs mount of shareholder discomfort with the proposed deal, Dell appears to be sticking to its guns - namely that the takeover will give shareholders an immediate value and exit. A $13.65 a share cash offer could be enticing to some long-suffering investors, given Dell's uncertain footing in the increasingly challenged PC market and its small footprint in faster growing hardware like tablet computers.
"The transaction offers an attractive and immediate premium for stockholders and shifts the risks facing the business to the buyer group. In addition, and importantly, the go-shop process provides stockholders an opportunity to determine if there are alternatives that are superior to the present offer," David Frink, a Dell spokesperson, said in a Friday statement.Currently, Michael Dell will provide $500 million cash and 273 million in shares worth about $3.73 billion to gain a majority stake in the company. MSD Capital Management, a fund that manages the capital of Michael Dell and his family, will commit a further $250 million in equity to the deal. PE-giant Silver Lake will make a $1.4 billion equity contribution to the deal, according to a February filing. Still, the near $4.5 billion Michael Dell will put up for a controlling stake in the PC maker amounts to less than a third of his reported $16 billion fortune, according to Forbes. As shareholders voice concern over the proposed buyout, it's yet to be seen whether Michael Dell decides to throw more of his cash at a turnaround of the company that carries his name. To read more on Dell's record-breaking takeover, see why the terms of the deal might give Federal Reserve Chairman Ben Bernanke reason to be concerned. Also see why Dell's wasted billions explain the math underpinning the buyout. Follow @AntoineGara
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