Southeastern Asset Management

It’s useful to be reminded every now and then that shareholders don’t really “own” corporations and they certainly don’t run them. Whatever you think of Carl Icahn’s self-funded, mildly loony plan to do a leveraged-recap-via-tender-offer of Dell, his basic argument, that Dell shareholders should be able to vote to (1) do that, (2) sell the company to its founder, or (3) none of the above, in some straightforward up-or-down way, had a certain real appeal. I mean, it’s their company, let them decide to sell 100% of it for $13.88ish or 80% of it for $14ish or 0% of it for … I see $13.82ish1 … or some intermediate pair of numbers. But, nope: Read more »

  • 02 Aug 2013 at 4:27 PM
  • M&A

Dell Pretty Sure That This Time It’s Figured Out This Merger Thing

Did you fly to Round Rock today to vote on Michael Dell and Silver Lake’s buyout of Dell? No, you did not, even I can’t keep up that fiction any more. By my count this is the third same-day cancellation of the special meeting but everyone’s figured out the game by now. Dell will eventually actually hold a shareholder meeting, but no one will come, which will be awkward except not really because nobody really comes anyway. The proxies come, that’s what matters.

Anyway today’s cancellation was because Dell signed a whole new merger agreement, under which: Read more »

  • 08 Jul 2013 at 2:11 PM
  • M&A

Who Will Be Saddest About A Successful Dell Buyout?

With today’s ISS report endorsing the Michael Dell / Silver Lake buyout of Dell, and with the market up on the likelihood that the deal will go through when shareholders vote on July 18, I suppose it’s about time to start the postmortems. How do you see the winners and losers? The opposition, led by Southeastern Asset Management and Carl Icahn, look increasingly like goofballs. Like: here was Dell, with a cash takeover signed at $13.65 per share and no competing bidders in sight. Southeastern and Icahn teamed up delightfully to both sell low and buy high: Southeastern sold millions of shares at below the deal price,1 while Icahn’s average cost in his shares appears to be at least $13.70. Throw in his share of the proxy solicitation costs and he’s out about $12 million, plus whatever he paid for the rather uninspiring financing commitments for his hypothetical tender offer, though to be fair those seem to have been payable mostly to himself. Anyway here:2 [Update: wasn’t counting the June $0.08 dividend in his basis; if you include that then he’s basically breaking even rather than losing $12mm. Correct chart in the footnote.2A]

Is $12mm or so a lot for Icahn to lose? No obviously not. Read more »

  • 18 Jun 2013 at 3:58 PM

Carl Icahn Does Another Dell Thing

Carl Icahn seems to have a lot of fun. Today he wrote a crazy letter to Dell shareholders that opens this way:

We take this opportunity to respond to rumors regarding the availability of financing for our proposal for a recapitalization at Dell and to address recent statements by Dell that demean the prospects of Dell. We are amazed by these statements by the Dell Board. In what other context would the person tasked with selling a product actually spend their efforts negatively positioning the very product they are trying to sell? Is that how the supposed “go-shop” was conducted? Can you imagine a real estate broker running advertisements warning of termite danger in a house each time a prospective buyer seems interested?

We can talk about the “recent statements by Dell that demean the prospects of Dell” in the footnotes1; up here let’s talk about Icahn’s “respon[se] to rumors regarding the availability of financing for our proposal for a recapitalization at Dell.” He says later in the letter: Read more »

One of my favorite themes in the Dell LBO pseudo-battle is the cognitive dissonance between Dell’s need to tell its shareholders how screwed it is, for the purpose of convincing them to vote to sell at the somewhat underwhelming price of $13.65, and its need to simultaneously tell everyone how good it is, for most other purposes. Like, just, self-esteem for one thing, but also things like getting financing and avoiding a MAC1 and not making prior performance statements sound like lies. Today Ronald Barusch has a delightful Dealpolitik column pointing out another important purpose, which is: paying management a lot for their excellent performance:

Last week Dell Inc. filed its annual compensation committee report. … There were raises for all of the top executives other than Mr. Dell, the chief executive. And everyone was granted bonuses. …

Each of the top officers was ranked at 100%, from a range that can vary from 0-187.5%, in terms of their individual performance. 100% indicates that individuals meet specified objectives, including those relating to “Strategic and transformational objectives relating to each executive officer’s function or business unit, including the degree to which the executive officer is driving change in support of Dell’s transformation.” The objectives are set so that “The Committee believes that the achievement of these performance objectives would correspond to meaningful improvements for the organization and are reasonably difficult to attain.”

Company performance is considered as well and this percentage was set at 70%, from a range that can vary from 0-150%.

Consider the transition of those pseudo-numbers: 100% performance by executives translates into 70% performance by the company translates into, um, this: Read more »

  • 05 Jun 2013 at 10:48 AM
  • M&A

Dell Begs Shareholders To Put It Out Of Its Misery

I feel like it would be a useful, or at least entertaining, exercise to require every company, once a year or so, to give a presentation to its shareholders that is like “here’s why you should vote for an LBO of our company at a ~2% premium to the current stock price.” Even if there’s not an LBO in the offing, I mean; just as rhetorical practice. Like Buffett’s tame bear. Anyway Dell, which does have an LBO in the offing, filed its presentation today and it’s 39 pages of “boy do we suck”:

High fives all around, boys! Or take this slide:1 Read more »

If there’s anything that Carl Icahn learned in the mean schoolyards of 1940s Far Rockaway, it’s chutzpah. To wit: responding to Dell’s demands for more information about his nebulous plan to sort-of take the company over by issuing a special dividend with no answers—but demands for information of his own. Read more »

Man, the resistance to this Dell deal is crumbling pretty fast isn’t it? Blackstone dropped its bid two weeks ago, Icahn and Southeastern have been relatively quiet since Icahn defended his right to a free exchange of ideas just before Blackstone dropped out, and the stock is at $13.33, ~2% below the $13.65 deal price, after being as high as $14.51 in the hopes of a better deal.

Dell filed its revised merger proxy today, with revisions presumably mostly driven by the SEC’s comments on its first draft from March. It doesn’t look like the SEC put up much resistance either; here’s a crappy redline and the changes are smallish. Here’s my favorite piece of SEC nitpicking:

Get it? That’s: Read more »