Could Dell boost its takeout bid by 10 percent to $15 a share?

Jefferies speculates the company may raise its offer from the current $13.65 a share to appease agitated shareholders, which now includes T. Rowe Price.

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Shara Tibken
3 min read
Will Dell PCs make a comeback now that the company is going private? Dell
Dell's plans to go private haven't pleased all of its shareholders, but investment banking firm Jefferies believes the PC maker could win them over with a sweetened bid.

The firm says it's likely that Dell CEO and founder Michael Dell and partner Silver Lake, a private equity firm, will raise Dell's takeout bid by nearly 10 percent to $15 a share to "satisfy agitated shareholders."

"Our conversations with investors lead us to believe that most want a raised bid, but that they are also cognizant of the lack of competing bidders and of the secular headwinds facing Dell's PC business," Jefferies analyst Peter Misek said today in a note to clients.

He estimates that about a fifth of Dell shareholders bought stock recently with an expectation of a bid higher than the current $13.65 a share. But Misek believes anything higher than $17 is unlikely.

"Overall, we expect enough would be satisfied with a $15 bid to get the deal approved," he said.

Dell declined to comment.

Dell last week confirmed reports that it was being taken private for $24.4 billion. Michael Dell, who owns about 14 percent of Dell's common shares, has teamed up with Silver Lake to acquire the company. Microsoft is also kicking in a $2 billion loan.

Shares in Dell have soared since details first emerged about a possible deal. The offer price of $13.65 a share represented a 25 percent premium over the company's closing price of $10.88 on January 11, the last day before Bloomberg first reported a potential deal. This afternoon, shares were trading slightly above the offer price, up nearly 1 percent to $13.80.

Dell has faced some shareholder criticism since it made its offer public. The company's largest outside shareholder, Southeastern Asset Management, said last week that it opposes plans to go private because the deal "grossly undervalues the company." Other reports have suggested that Southeastern isn't alone, with several other top Dell shareholders opposing the offer price.

Southeastern today said in a regulatory filing that it has hired D.F. King & Co., a proxy solicitation firm, to "provide certain consulting and related services." The firm likely hopes D.F. King will help it fight the deal and secure a better price for shareholders.

T. Rowe Price, meanwhile, today said it also is against the buyout.

"We believe the proposed buyout does not reflect the value of Dell, and we do not intend to support the offer as put forward," Brian Rogers, T. Rowe chairman and chief investment officer, said in a statement provided to CNET.

Together, Southeastern and T. Rowe own about 13 percent of Dell's outstanding shares, according to The Wall Street Journal.

Dell, for its part, noted in an SEC filing yesterday that it explored all options and determined going private to be its best bet. Doing so is designed to give the company time to figure out its next move outside of shareholder scrutiny.

Dell, which has long been one of the world's largest PC makers, has been struggling of late. Before the deal, the company's stock had lost about a third of its value over the past year as it shifted focus away from its traditional computer market to providing business products in areas such as networking and storage. It has made many acquisitions over the past several years and has said it will continue to do so. However, there are worries about how fast those businesses are taking off.

The company has said it remains committed to the PC market. But Dell and rival Hewlett-Packard have had trouble competing with up-and-coming Asian rivals like Lenovo and Asus. Lenovo in late 2011 surpassed Dell to become the world's second-largest provider of PCs.

Updated at 8:40 a.m. PT with details about Southeastern hiring a proxy solicitation firm and Dell declining to comment. Updated at 12 p.m. PT with comment from T. Rowe Price.