The future of the Dell (DELL) deal is looking dimmer as its largest outside investor Southeastern Asset Management buys more shares while openly opposing the deal. Southeastern Asset Management bought almost 17 million shares in the past weeks. It now owns 146.8 million shares, which is about 8.5% of the company. Southeastern Asset Management has openly opposed the Dell deal, which is led by Michael Dell and plans to buyout other shareholders at $13.5 a share. Southeastern Asset Management said that the deal “grossly undervalued the company,” and believes that Dell is worth $24 a share, according to Barron’s.
Southeastern Asset Management has been a long-term holder of Dell, and started buying the stock when it was trading at above $30. Its average cost is estimated to be above $25. If the deal went through at $13.5, Southeastern would have lost almost 50% of its original investment, excluding dividends.
Dell is now traded at $13.7, slightly above the deal price, suggesting that investors are anticipating higher prices for the deal.
To be fair, the Dell deal does “grossly undervalue the company.” Though not growing, Dell has always been profitable, as shown in the EPS chart below:
And it is now traded at a historical low P/E ratio:
And P/S ratio:
A median P/E of the last 10 years would suggest a deal price of above $25: