enoch01 Posted February 5, 2013 Share Posted February 5, 2013 Wow the folks at Southeastern really got their teeth kicked in on this one. According to Bernstein their cost basis was $20 for their shares Plus all those options which will now expire worthless, barring a miracle. Correction edit ($7 strikes): they won't expire worthless, but they'll take a big loss on them. Link to comment Share on other sites More sharing options...
rohitc99 Posted February 5, 2013 Share Posted February 5, 2013 boilermaker75 - no worries :) , was not able to understand what you meant earlier. but now i see why you mentioned appl. also noticed that the april and may calls @14 are at the same price. maybe the implied vol has collapsed with the announcement ? Link to comment Share on other sites More sharing options...
txlaw Posted February 5, 2013 Author Share Posted February 5, 2013 I actually did that, but I bought the March $14 calls. We had sold most of our stock as it went up to $13.70, because I had this gut feeling they were going to rip off shareholders. We did great, but alot of shareholders won't. Once I had sold most of the shares, last Friday I bought the calls...small amount...but I figured "heads I lose a little, tails I win 2-4 times the investment". I suspected the initial offer would be below $14, but that as the stock traded near the $13.65 mark near Friday's close, I thought they would come back with an offer around $14.50-14.75...slight premium to the market close. I still don't understand why everyone is quoting the 25% above the price around when the rumors began, since what does that have to do with anything? They aren't using a 30-day trading average or market close premiums...it's a God-awful shitty deal, but they know they've got most of the votes to get it through. The board should be sued...you would think their twins work for some burger restaurant in Texas! Cheers! Good instincts on your part. I thought that MSD wouldn't do that to the rest of the shareholders, but when that $14 to $15 range kept being repeated over and over in reports, I started to get a bit pessimistic, thinking it could very well come in at $15. And then the bid came in under $14! Wow. Link to comment Share on other sites More sharing options...
Guest wellmont Posted February 5, 2013 Share Posted February 5, 2013 Wow the folks at Southeastern really got their teeth kicked in on this one. According to Bernstein their cost basis was $20 for their shares they talk a lot about "partnering up" with management. :) Link to comment Share on other sites More sharing options...
alwaysinvert Posted February 6, 2013 Share Posted February 6, 2013 There is a 45 day "go shop" period. Do most consider it highly unlikely that a 2nd bidder appears. If everyone feels that MD is stealing the company, is it just that the number is too big to find another viable bidder? No one is going to make a bid if you know MD wants the company and will block your offer. Who wants Dell without Michael Dell? I think the Special Committee has a duty to look at the price of the shares for greater than a 30 and 90 day window. The fact that the company was buying back shares at prices higher that the takeover price I believe will be a problem in any defense. I have no clue why the Company was not buying back shares hand over fist when the shares were in the single digits. My guess would be that the Board did not support it given the potential offer from MSD. There really is too much conflict of interest here. Also, it doesn't appear that the Special Committee fought very hard for a higher price - I would be interested to see transcripts from their discussions. Having said that - I sold my shares today as I think it is basically over, the only people who will make money now are the lawyers. I agree. Way too much conflict of interest. Dell should have removed himself from the board as soon as there was any intention to pursue this. The board needed to remain completely neutral and removed from Dell. Cheers! Can they really block an offer that is clearly superior in terms of shareholder return and not be sued like hell? Everyone says this is a no-go without Michael Dell and I admit it seems a stretch due to his large stake, but I don't see any reason why another buyer, if interested, couldn't come up with the funds in this credit climate. Yes, not having Michael Dell on board is a big negative but does anyone actually think this wouldn't make financial sense to buy at $15 with or without him? I'm not sure how much of a precedent you can make of the bidding wars of the 80s (among them RJR Nabisco) but I'm far from certain all is said and done here in terms of price. Link to comment Share on other sites More sharing options...
Guest wellmont Posted February 6, 2013 Share Posted February 6, 2013 Can they really block an offer that is clearly superior in terms of shareholder return and not be sued like hell? Everyone says this is a no-go without Michael Dell and I admit it seems a stretch due to his large stake, but I don't see any reason why another buyer, if interested, couldn't come up with the funds in this credit climate. Yes, not having Michael Dell on board is a big negative but does anyone actually think this wouldn't make financial sense to buy at $15 with or without him? I'm not sure how much of a precedent you can make of the bidding wars of the 80s (among them RJR Nabisco) but I'm far from certain all is said and done here in terms of price. the p/e sponsor only has to put up $1b in this deal. this is already the 5th largest p/e deal ever. that's a big investment for SL. So lets think about this. MSD is contributing $4b. msft is contributing $2b of debt. There is no strategic buyer coming in without MSD buy in. So lets look at financial buyers. Which sponsor is going to put up $5b to replace SL, MSD contribution, and up to $3b more to get the price to $15 a share? In addition, the banks would have to finance $2b more to replace the MSFT contribution. Besides MSD would never agree to a deal offered by another sponsor. He has longstanding ties to SL. Finally why would MSD sell for $15 when he is potentially looking at a double or triple with the SL deal? The numbers only work with this deal. They don't work for any other deal imo. that's why MSD is going to triple his net worth in a few years. :) Link to comment Share on other sites More sharing options...
matjone Posted February 6, 2013 Share Posted February 6, 2013 Now I see what Charlie Munger means about the importance of having a "no a**hole rule." Is it true that Michael Dell won't be allowed to vote on this? I am just going to add to my checklist "do not invest alongside Michael Dell." Link to comment Share on other sites More sharing options...
alwaysinvert Posted February 6, 2013 Share Posted February 6, 2013 Can they really block an offer that is clearly superior in terms of shareholder return and not be sued like hell? Everyone says this is a no-go without Michael Dell and I admit it seems a stretch due to his large stake, but I don't see any reason why another buyer, if interested, couldn't come up with the funds in this credit climate. Yes, not having Michael Dell on board is a big negative but does anyone actually think this wouldn't make financial sense to buy at $15 with or without him? I'm not sure how much of a precedent you can make of the bidding wars of the 80s (among them RJR Nabisco) but I'm far from certain all is said and done here in terms of price. the p/e sponsor only has to put up $1b in this deal. this is already the 5th largest p/e deal ever. that's a big investment for SL. So lets think about this. MSD is contributing $4b. msft is contributing $2b of debt. There is no strategic buyer coming in without MSD buy in. So lets look at financial buyers. Which sponsor is going to put up $5b to replace SL, MSD contribution, and up to $3b more to get the price to $15 a share? In addition, the banks would have to finance $2b more to replace the MSFT contribution. Besides MSD would never agree to a deal offered by another sponsor. He has longstanding ties to SL. Finally why would MSD sell for $15 when he is potentially looking at a double or triple with the SL deal? The numbers only work with this deal. They don't work for any other deal imo. that's why MSD is going to triple his net worth in a few years. :) KKR and other PE firms, Google, Oracle etc? Southeastern? Microsoft isn't the only big tech firm with money to spend. And would Michael Dell really have a vote in an eventual counterbid? I don't find that likely. And how would he be able to justify his no vote against a higher bid when the issue comes up in court? I'm not saying it's going to happen, just that everybody has ruled out another bid out of hand and we have been surprised before. This remarkably lowball bid may open up opportunities for people looking to leave a mark, at least forcing the initial bid a bit higher. If they could do a $25b hostile deal in 1988, surely they could do one of similar size in 2013 even if the equity part is bigger and financing not quite as easy to get. Link to comment Share on other sites More sharing options...
Parsad Posted February 6, 2013 Share Posted February 6, 2013 Pretty good Bloomberg article on how the Dell deal developed starting back in August of last year. Cheers! http://www.bloomberg.com/news/2013-02-06/dell-s-mr-denali-talks-said-to-break-up-a-few-times-over-price.html Link to comment Share on other sites More sharing options...
cogitator99 Posted February 6, 2013 Share Posted February 6, 2013 I had thought that Longleaf, Pzena, etc. would fight this deal like hell...even if they did, I guess it wasn't enough. Link to comment Share on other sites More sharing options...
Mephistopheles Posted February 6, 2013 Share Posted February 6, 2013 Beginner question: How does the shareholder vote work for something like this? Don't shareholders have to approve of this deal first? Also, does MSD get to vote his shares to approve of a deal, since he is a buyer, or do only the other shareholders get to vote? In that case, won't the majority just vote "no" for the deal to get done since it's so cheap? I remember when Berkshire was acquiring the rest of Wesco that it didn't own, it wasn't allowed to vote on the deal. Just trying to get a sense of how these things work, thanks. Link to comment Share on other sites More sharing options...
T-bone1 Posted February 6, 2013 Share Posted February 6, 2013 You are correct that MSD can't vote his shares, however this is unlikely to be an impediment. I have read a hypothesis (which makes sense to me) that the reason they leaked news of the buyout weeks ago was to get as many investors as possible to sell to arbitrageurs. As a long term investor with a favorable view of Dell's future, I am happy to see the deal fall apart and be able to buy more at $11 or so - for an arbitrageur that would be a disaster so they will all vote for the deal. In terms of the ability of Southeastern and others to fight the deal, I would note that HPQ has performed about as well as dell despite their being no chance of a buyout. Food for thought. Link to comment Share on other sites More sharing options...
Guest wellmont Posted February 6, 2013 Share Posted February 6, 2013 Pretty good Bloomberg article on how the Dell deal developed starting back in August of last year. Cheers! http://www.bloomberg.com/news/2013-02-06/dell-s-mr-denali-talks-said-to-break-up-a-few-times-over-price.html which is about when he stopped buying back stock at dell? cheers! Link to comment Share on other sites More sharing options...
constructive Posted February 6, 2013 Share Posted February 6, 2013 http://dealbreaker.com/2013/02/microsoft-will-take-a-low-interest-rate-on-its-dell-debt-to-demonstrate-its-emotional-commitment/ This is quite interesting - Silver Lake refused to pay much above $13 a share, so Michael Dell had to chip in extra for his shares. Also Microsoft agreed to make a below market interest rate loan, because they like Dell a lot. Link to comment Share on other sites More sharing options...
bobp Posted February 6, 2013 Share Posted February 6, 2013 Keep in mind Dell will still pay an 8 cent dividend in late April if you're deciding whether to sell or hold until closing. From FT: "The biggest deal to take a company private since the global financial crisis was almost derailed by a debate over whether Dell would continue paying its quarterly dividend over the next few months" http://www.ft.com/intl/cms/s/0/c4143100-7088-11e2-a2cf-00144feab49a.html#axzz2K9XQ8wGf Link to comment Share on other sites More sharing options...
Alekbaylee Posted February 8, 2013 Share Posted February 8, 2013 Southeastern not happy with the price offered... http://www.theglobeandmail.com/globe-investor/key-dell-shareholder-unhappy-with-244-billion-buyout/article8374305/ Link to comment Share on other sites More sharing options...
txlaw Posted February 8, 2013 Author Share Posted February 8, 2013 SEAM's letter to DELL: http://www.sec.gov/Archives/edgar/data/807985/000094787113000078/ss164605_sc13d.htm Link to comment Share on other sites More sharing options...
txlaw Posted February 8, 2013 Author Share Posted February 8, 2013 Btw, I'm now watching from the sidelines. Completely sold out of DELL. Link to comment Share on other sites More sharing options...
T-bone1 Posted February 8, 2013 Share Posted February 8, 2013 A publicly traded stub would be amazing! (Not holding my breath though) Link to comment Share on other sites More sharing options...
Grenville Posted February 8, 2013 Share Posted February 8, 2013 Glad to see Southeastern out there fighting for their IV. Thought this in the letter was interesting: "There are materially superior alternatives to the proposed transaction, and we hope that in addition to supporting one of the alternatives, Michael Dell would participate. 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." I assume he's referring to others including Fairfax. Link to comment Share on other sites More sharing options...
fareastwarriors Posted February 8, 2013 Share Posted February 8, 2013 http://professional.wsj.com/article/SB10001424127887324590904578292310886269672.html?mg=reno64-wsj#articleTabs%3Darticle Big Dell Holder to Vote Against Buyout . ... Southeastern is estimated to have the highest cost basis for its Dell shares—at $24.58 per share—among 25 institutional holders analyzed by Ipreo, a capital markets data and advisory firm. The figures come from the most recent complete public regulatory filings, the third quarter of last year. But it's not the only investor that may be facing a loss if Dell is sold for $13.65 a share. As of the third quarter, Dell's 25 largest active institutional shareholders on average had bought their stock at an estimated $16.11, according to Ipreo. All but five of the 25 institutions could, as of the third quarter, face a loss at the buyout price. Funds run by T. Rowe Price Group Inc., TROW +0.51%which is the second largest institutional holder, are estimated to have bought Dell stock at an average of $16.72, according to Ipreo. Some funds could even make money: Funds at Pzena Investment Management Inc. PZN +3.99%have an estimated cost basis of $12.34 on Dell stock, Ipreo said. Link to comment Share on other sites More sharing options...
Guest wellmont Posted February 8, 2013 Share Posted February 8, 2013 SEAM understands that this deal is going to make the dell equity holders a fortune. they want in. :) if big dumb institutions vote for this deal they are just plain worthless. Link to comment Share on other sites More sharing options...
txlaw Posted February 8, 2013 Author Share Posted February 8, 2013 Glad to see Southeastern out there fighting for their IV. Thought this in the letter was interesting: "There are materially superior alternatives to the proposed transaction, and we hope that in addition to supporting one of the alternatives, Michael Dell would participate. 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." I assume he's referring to others including Fairfax. Let's hope so. Link to comment Share on other sites More sharing options...
mcliu Posted February 9, 2013 Share Posted February 9, 2013 I know who I'm voting for, not that my votes matter. :) Link to comment Share on other sites More sharing options...
ShahKhezri Posted February 9, 2013 Share Posted February 9, 2013 "The Dell Deal May Die" http://online.barrons.com/article/SB50001424052748704372504578287960502012492.html?mod=BOL_hpp_mag Link to comment Share on other sites More sharing options...
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