Did Michael Dell take his company private on the cheap?
It does them no good now, but the big investors who complained last year that Michael Dell and his buyout-shop partners were taking Dell Inc. private at a bargain price would have a good case today.
The $25 billion Dell leveraged buyout closed one year ago this week. Before it did, fund managers T. Rowe Price, Southeastern Asset Management and Carl Icahn protested that the company was worth more than the $13.75-per-share deal value.
Michael Dell and co-buyers Silver Lake Partners had modestly sweetened the original $13.65 offer and added a 13-cent-per-share special cash dividend, but the shareholders still argued to the end that a coming PC-replacement cycle and good prospects for a Dell restructuring made it worth a good deal more. Of course, Dell shares had traded a good deal cheaper on their own, before the Michael Dell offer, so he was able to argue it was a fair deal.
Well, the market has since supported the unhappy shareholders' view. The chart above shows that leading stocks in Dell's core PC business have surged since Dell has been in private hands. Shares of Microsoft Corp. (MSFT), Hewlett-Packard Co. (HPQ) and China's Lenovo Group (LNVGF) are up an average of 34% in the past 12 months.
This strongly suggests that Dell, which has gained a bit of market share in PC shipments this year, would have had its market value lifted similarly. The bonds of Dell have traded strongly, too, as sign that the company's finances are viewed as having improved in private hands.
For Michael Dell, who founded the company 30 years ago, this has been a pretty happy anniversary all around.