Our own Dell (DELL $13.52) will go private for $24.4B, or $13.65 per
share, paid by Michael Dell, Silver Lake, and Microsoft. With our cost
basis at $15, we were hoping for more, and we weren't alone. Major
shareholders are angry, calling this a shady insider deal by Michael
Dell to protect his wealth at the expense of the shareholders that he
and other management so badly disappointed over the past decade's litany
of botched operations and missed opportunities. A short list: No PC
innovation, whiffed smartphones, missed tablets — nice work for a tech
company.
Bernstein Research said that if Dell uses 40 pct of its annual cash
flow to pay down its debts, a sale of the company in five years could
put a cool $10B into the pockets of Michael Dell, Silver Lake, and
Microsoft. Thanks for nothing! Bernard Lanigan, who runs a wealth
management firm in Georgia, told Reuters: "This price is ridiculously
low and looks like Michael Dell and all are trying to steal the company
from shareholders. We cannot believe the board would allow this inside
deal at this low price." Agreed. Our DCF analysis of the firm showed why
management is giving up on the business model and is probably going to
scrap it entirely and pursue a sum-of-the-parts sell-off to squeeze out
whatever value is left, but will do so after sloughing off existing
shareholders at less than $14 per share.
Michael Dell's bad management of his firm contributed to the stock
sell-off that makes it so cheap for him to buy out. On top of that,
he'll probably repatriate foreign assets to help pay for the buyout
after he decided not to do so as a way of compensating shareholders
through dividends. Classy. The remainder of his life may be marked by
shame, but not poverty.