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T. Rowe Price joins growing opposition to Dell buyout

Founder and chairman of Dell computers Michael Dell passes a screen projection before speaking at a news conference in Sydney August 14, 200
Founder and chairman of Dell computers Michael Dell passes a screen projection before speaking at a news conference in Sydney August 14, 200

By Aaron Pressman

(Reuters) - Dell Inc's third-largest shareholder, T. Rowe Price Group, on Tuesday joined a growing number of investors putting pressure on Michael Dell and his partner Silver Lake to sweeten their $24.4 billion buyout offer for the PC maker.

"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 Chief Investment Officer Brian Rogers said in a statement.

The money manager, which declined further comment, controlled 4.4 percent of Dell shares as of September 30, according to Thomson Reuters data.

The company has said it needs a majority of investors, excluding Chief Executive Michael Dell's 14 percent stake, to approve the transaction. With T. Rowe added to the list, at least six investors with more than 18 percent of Dell shares, excluding Dell's stake, have now said they oppose the deal.

T. Rowe is not typically known as an activist investor and it is rare for the money manager to come out so publicly against a deal. It joins Dell's second-largest shareholder, Southeastern Asset Management with an 8.5 percent stake, in voicing opposition.

"You have such credible voices, voices that are highly respected in the investment management community, saying that the price doesn't make sense," said Don Phillips, president of research at Morningstar in Chicago. "A very likely outcome is that Dell is still going to go private, but a higher price point."

A spokesman for Dell declined to comment beyond their previous statements. The company has said that its board had considered many strategic options before opting to go private.

Dell had retained a management consultant to help assess its position and concluded that the proposed all-cash deal was in the best interests of stockholders, the company said in a securities filing on Monday.

GROWING OPPOSITION

Michael Dell last week announced that he had struck a deal to take Dell private, partnering with private equity firm Silver Lake and Microsoft Corp. The goal is to facilitate Dell's difficult transition from a commodity maker of computers into a provider of services to enterprises as a private company, away from Wall Street's scrutiny.

But since the deal was announced, a steady stream of investors have said the $13.65 per share price was too low, ranging from major holders like T. Rowe Price and Southeastern to smaller firms such as Alpine Capital Research and Schneider Capital.

"We will be surprised if the final price is not meaningfully higher than the current offering price," said Nicholas Tompras, president of Alpine Capital Research in St Louis.

The firm will vote its 2 million shares against the current Dell deal which "grossly under-values its numerous and varied businesses," Tompras said.

Shares of Dell traded above the offer price at $13.80, up 0.7 percent on the day, after the T. Rowe Price announcement.

Several sources close to the Michael Dell-Silver Lake consortium told Reuters on Friday that the buyers did not intend to raise their offer price, which represents a 25 percent premium to where the stock was trading before news of the deal talks emerged in January.

The consortium is holding to the belief that information contained in an upcoming proxy statement, when published, will reveal how Dell's independent committee negotiated thoroughly and explored all options, the people said.

Dell has now gone into a go-shop process, during which it can solicit better offers. But opposing investors argue that Michael Dell's involvement may deter other bidders from coming forward.

Memphis-based Southeastern has offered several alternatives that it said would produce a better outcome for public shareholders. Dell could borrow money to make a major share repurchase or break up the company and sell the units separately, Southeastern said.

(Reporting by Aaron Pressman in Boston; Additional reporting by Jessica Toonkel in New York; Editing by G Crosse, Tiffany Wu and Nick Zieminski)

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