Skip to main content

The Globe and Mail

Top outside shareholder demands Dell open its books

Dell Inc.’s offices in Santa Clara, Calif.

Paul Sakuma/The Associated Press

Dell Inc.'s largest outside shareholder is demanding the PC maker open its books, signalling it could become more active in opposing founder Michael Dell's proposal to take the company private.

Southeastern Asset Management, which holds more than 8 per cent of Dell shares, including options, asked for the records in a regulatory filing on Tuesday on behalf of its largest client, Longleaf Partners Fund.

Citing Dell's silence on the deal during a recent earnings call, Southeastern wrote in a letter to Dell included in the filing that "shareholders should be provided with meaningful, straightforward information."

Story continues below advertisement

It said that to justify an inadequate buyout price, Dell intentionally emphasized the decline in global PC sales, while ignoring growth in its IT services segment.

"Under the current buyout proposal, management and (buyout partner) Silver Lake stand to receive all of the future upside while denying shareholders, who have paid to reposition the company, the opportunity to reap the rewards of our investment," Southeastern said.

A spokesman for Dell declined to comment.

Michael Dell, teaming up with private equity firm Silver Lake and software maker Microsoft Corp., is offering $13.65 (U.S.) a share to buy out the company, but at least four of its largest investors are opposed to the $24.4-billion deal.

Shareholders representing almost 14 per cent of Dell shares not held by Michael Dell have said they will vote against the proposed buyout.

The founder and CEO did not join a management discussion of the company's quarterly financial results in a conference call with analysts last month because of his participation in the buyout. Dell executives also did not comment on the buyout.

The company also declined to provide any financial forecast for fiscal 2014 or the fiscal first quarter, citing the proposed buyout, and it changed the way it reported the financial results of divisions.

Story continues below advertisement

Michael Dell created the computer maker from his college dorm room in 1984 and is now a billionaire. He holds roughly 16 per cent of the company and needs a majority of shareholders – excluding himself – to vote for the deal.

Memphis-based Southeastern, run by activist investor Mason Hawkins, has suggested several alternatives it says would produce a better outcome for public shareholders. Dell could borrow money to make a major share repurchase, or the company could be broken up and the units sold separately.

Another approach would have been to return Dell's growing overseas cash reserve to all shareholders instead of using it to fund the proposed buyout at their expense, the fund said in the letter.

Since news of the proposed buyout emerged in January, the stock has gained more than 30 per cent – a rally that analysts say might evaporate if the deal falls through.

Dell has said it plans to file a proxy statement with the U.S. securities regulators on the merger agreement.

The company, regarded as a model of innovation in the early 2000s for pioneering online ordering of custom-configured PCs, missed the big industry shift to tablets, smartphones and high-powered consumer electronics such as music players.

Story continues below advertisement

Dell is trying to reinvent itself as a seller of services to corporations – an internal overhaul that some analysts say might be better conducted away from public scrutiny.

Report an error

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨

Combined Shape Created with Sketch.

Combined Shape Created with Sketch.

Thank you!

You are now subscribed to the newsletter at

You can unsubscribe from this newsletter or Globe promotions at any time by clicking the link at the bottom of the newsletter, or by emailing us at