Dell will have to fight for its right to go private

One major holdout between Dell and a private company
One major holdout between Dell and a private company

While Dell is trying to go private, the PC company's largest outside investor may have constructed a significant roadblock to the firm's independence.

Southeastern Asset Management, which represents an 8.5 percent stake in Dell, said last week it plans to fight the move to make Dell a private company.

The $24.4 billion buyout deal proposed by CEO Michael Dell values the company at $13.65 per share, what appears to be a reasonable offer for most investors who haven't seen a price even approaching $14 per share since last May.

In a letter to the Dell Board of Directors, Southeastern Asset Management disagrees, contending that Dell is worth significantly more at $23.72 per share.

Dear Dell...

The letter outlines several alternatives to the current deal managed by private equity firm Silver Lake Partners, including payment of special dividends to shareholders, an auction of shares, or seeking a completely different deal with a higher company value.

"If given the option, other existing shareholders could provide as much or more equity than Michael Dell currently proposes to do, which would lead to superior levels of equity contribution and more financial flexibility to serve Dell's customers and to grow," Southeastern Asset Management said.

However, Southeastern Asset Management admits that due to rules that the board of directors already imposed, most of the alternatives are not actually viable. For that reason, the firm hopes that the board ultimately decides to reject the deal to strike a new one.

Dell is currently undergoing a 45-day go-shop process to draw out any outside bids for the company.

While Southeastern Asset Management's options seem limited in actually halting Dell's privatization, there's still a small opportunity for the firm to raise enough of a fuss to influence the deal's terms. The effect, if any, on Dell customers will be negligible though compared to the titanic shift to a privatized company.