Dell under pressure to make deal more attractive, as transaction undervalues the company

SAN FRANCISCO: Dell Inc., the computer maker that agreed to a $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, analysts said. Private-equity buyers have also given investors a chance to co-invest in a transaction to line up support for a buyout that met with resistance.

Dell's biggest outside investors, T. Rowe Price Group Inc. and Southeastern Asset Management, oppose the $13.65-a-share proposal, saying it undervalues the No. 3 maker of personal computers.

In the largest leveraged buyout since the financial crisis, founder Michael Dell and private-equity firm Silver Lake Management LLC seek to take Dell private after the company lost almost one-third of its value in 2012 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 the opposition gains momentum.

"I don't think the current offer will get the shareholder vote, especially given the fact that the two largest shareholders have come out early and against," said Louis Meyer, an analyst at Oscar Gruss & Son Inc.

Opposing investors will first push for a higher price, he said. Failing that, they will probably "press for some sort of recapitalization, such as a a special dividend," he said.

Dell rose less than 1 per cent to $13.79 at the close in New York on Tuesday. That was the highest since May 2012.

T. Rowe Price and Southeastern, which together own more than 10 per cent of the stock, said Dell is worth more than its buyers have offered.

"We believe the proposed buyout does not reflect the value of Dell and we do not intend to support the offer as put forward," T. Rowe Price Chairman Brian Rogers said in a statement.