Dell Makes Argument for Bid to Take Company Private

In a lengthy SEC filing, Dell officials laid out why the company should go private, and why Michael Dell's offer is the best option.

Dell executives in a regulatory filing are outlining a bleak financial future for the PC vendor in its efforts to win shareholder support for plans to take the company private.

In a 274-page filing with the U.S. Security and Exchange Commission (SEC), Dell officials talked about their four-year efforts to move the company's focus away from its ailing PC business and toward its strategy to become a seller for enterprise IT solutions and services.

The documents show a company that is continuing to get financially battered by the downturn in the PC industry with tablets and smartphones continuing to steal away consumer and corporate technology dollars and little help coming from Microsoft's Windows 7 and 8 operating systems. Founder and CEO Michael Dell and other company executives have argued that taking the company private would enable them to accelerate their efforts to transform the world's third-largest PC vendor outside the glare of Wall Street analysts and the pressures to meet quarterly financial targets.

Michael Dell and equity firm Silver Lake Partners on Feb. 5 announced a $24.4 billion leveraged buyout plan that would include taking the company private. The plan called for buying outstanding Dell stock for $13.65 a share, a 25 percent premium over the price the stock was at Jan. 11, when leaks of a possible buyout plan first came out. The deal also includes a $2 billion contribution from Microsoft.

The plan has been under siege since. Some of the largest shareholders—such as Southeastern Asset Management and T. Rowe Price—balked at the deal soon after it was announced, saying the price was far too low and undervalued the company while benefiting Michael Dell and a few others. Those investors vowed to vote against it if the price wasn't raised significantly. Southeastern officials reportedly said they saw a fair price being as high as $24 a share—and they were soon joined by outspoken investor Carl Icahn.

The board of directors, which had voted to support the deal, said in March that all options for Dell had been explored, that a buyout was the best alternative and that the $13.65 price was a fair one. However, since March 22, two other groups—one led by private equity firm Blackstone Group and another by Icahn—have made bids that are in the $14- to $15-per-share range, and the board's special committee has said it will consider those.