Dell Wants Shareholders To Know That Southeastern Wasn't Looking Out For Them

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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:

Dell: The Special Committee believes that the trading price of the Common Stock represents the best available indicator of the Company’s going concern value and that the merger consideration is fair to the Company’s unaffiliated stockholders.
SEC: Umm did you notice that the stock is trading like 5% above the merger price now? HOW IS THAT FAIR?
Dell: We meant the pre-announcement trading price.

OBVIOUSLY, I guess, but you have to love the SEC a little bit for it. Somebody needs to hold companies to the consequences of taking their bland puffery literally. The trading price of Dell's stock only reflects its going concern value when it's below the price the board is selling it for.

Beyond that there's not too much of substance here. There are new, or new-ish, retention-awards-slash-golden-parachutes for some Dell executives. There's some spelling out of assumptions (and inclusion of one more optimistic case) in the descriptions of JPMorgan's and Evercore's fairness opinions, which, if you cared, you could read the fairness decks and underlying BCG estimates already. (You didn't care, did you?) There's one more pretty non-substantive November 2012 JPMorgan presentation, about how people reacted to Dell's 3Q2012 earnings.1 There's a description of events since the first merger proxy was filed in late March, including Icahn's shenanigans and Blackstone's due diligence and ultimate decision to drop out.2

The SEC does, however, seem to have pushed back a little on the question of "why couldn't you have done a deal that let public shareholders roll over into the surviving company?," as currently demanded by Southeastern Asset Management and other disgruntled shareholders. The original proxy's statement that, when asked on January 29, "Mr. Dell and Silver Lake were not interested in pursuing a transaction such as the one proposed by Southeastern in which the public stockholders would retain an interest in the Company," changed to a more definitive "Mr. Dell and Silver Lake were not willing to modify their previous proposal in order to provide that the public stockholders would have an opportunity to retain an interest in the Company." And there's this further explanation:

As discussed in “—Background of the Merger,” prior to the signing of the merger agreement, the Company notified Mr. Dell and Silver Lake that Southeastern desired for any potential going private transaction involving the Company to provide an opportunity for stockholders to roll over a portion of their equity interests in the Company. In contrast, as discussed in “—Background of the Merger,” Southeastern’s suggestion in June 2012 that Mr. Dell consider a going private transaction contemplated that only Mr. Dell and Southeastern would roll over all or a portion of their equity interests in the Company. The Parent Parties, the SLP Filing Persons and the MSDC Filing Persons were not willing to consider an alternative transaction structure in which the unaffiliated stockholders would be permitted to roll over a portion of their equity interests in the Company in light of their belief that it is in the best interests of the Company to operate as a privately held entity, as discussed in greater detail above.

The Background adds this:

On June 15, 2012, a representative of Southeastern Asset Management, Inc. (“Southeastern”), a stockholder of the Company, which has disclosed that it owns approximately 146.5 million shares of Common Stock, contacted Michael S. Dell, the Company’s founder and Chief Executive Officer, to suggest the possibility of a going private transaction involving the Company and to express Southeastern’s interest in participating in such a transaction by rolling over a portion of its shares of the Company. The representative of Southeastern also sent Mr. Dell a spreadsheet outlining such a transaction, which did not contemplate the rollover of shares of any existing stockholders of the Company other than Southeastern and Mr. Dell.

I ... don't really know what that has to do with anything? Except, I guess, the obvious, which is that it sort of undermines Southeastern's current position that Dell should allow existing shareholders to roll into a public stub of a new, sort-of-LBO'ed Dell. And, perhaps, is intended to undermine Southeastern's chances of rallying other shareholders to oppose the deal. "See, shareholders?," Dell can say. "Southeastern wasn't trying to do a deal that was open to all of you. They were just looking out for themselves." Same, I guess, as Michael Dell was.

Dell: revised proxy [EDGAR]
Redline [Google Docs]

1.Here's how:

2.Highlights:

Between March 20, 2013 and April 15, 2013, various parties entered into joinders to Blackstone’s confidentiality agreement or were otherwise engaged to advise the Blackstone consortium, including two potential equity financing sources, four potential debt financing sources and ten advisory firms (including accountants and consultants). These parties subsequently participated in the due diligence process being conducted by the Blackstone consortium.

Ten advisory firms! And:

On April 10, 2013, International Data Corporation, an independent market research firm, issued a report on the PC market (the “IDC Report”), which stated that total worldwide PC shipments in the first quarter of 2013 had declined approximately 14% compared to the first quarter of 2012. ...

On April 18, 2013, a representative of Blackstone informed Mr. Mandl that Blackstone had decided not to submit a definitive proposal to acquire the Company and was withdrawing from the process as a result of its concerns about the PC industry outlook, and, in particular, the negative trend reflected in the IDC Report, as well as the downward trend in the Company’s projected operating income for the current year. Blackstone subsequently delivered a letter to this effect to the Special Committee dated the same date.

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