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Dell stock closes above LBO offer price

Bump follows claims of ‘gross undervaluation’

Dell stock closes above LBO offer price
Analysts expect a counter-offer from Michael Dell’s buyout group.

Dell Inc closed at $13.70 in New York yesterday, 5 cents above its proposed buyout share price, following claims that the tabled LBO offer represented a "gross undervaluation", Bloomberg reported.

Michael Dell, founder, board chairman and CEO of the former PC market leader, last week secured the approval of the board for a $13.65-a-share leveraged buyout, which would have ended a 24-year period as a publicly traded firm. Following the approval, the company entered a so-called "go shop" period where stakeholders can examine the bid to determine if better offers are available. The offer price is 25% above the $10.88 closing price of 11 January, which was the last trading day before Bloomberg first reported the LBO negotiations.

The deal was to be funded by Michael Dell's 16% stake plus an undisclosed cash injection; $1bn from partner Silver Lake Management LLC; a $2bn loan from Micrsoft; and up to $15bn in bank loans from four different lenders.

But Dell's largest outside shareholder Southeastern Asset Management, in a letter to the board, outlined analyses that cited Dell's business-computing acquisitions and server and technology-services operations, and suggested a price of around $24 a share.

"They're probably going to sweeten it a little bit," said San Francisco-based ISI Group analyst Brian Marshall. "These deals aren't usually inked on the first offer."

Southeastern characterised the LBO as an attempt to "acquire Dell at a substantial discount to intrinsic value at the expense of public shareholders" and pledged to block the buyout with a proxy fight or legal action. Several other shareholders had, prior to Southeastern's letter being sent, already announced their intentions to vote against the LBO.

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