Dell $25bn buyout was underpriced, judge rules

Michael Dell Image copyright Getty Images
Image caption Dell chief executive Michael Dell

A US court has ruled that the buyout of Dell by its founder Michael Dell and investment firm Silver Lake Partners was underpriced by 28%.

The ruling is a win for investors who rejected the $24.9bn (£17.2bn) deal in 2013.

Encouraged by activist investor Carl Icahn, dissatisfied investors asked the court to rule on a fair value.

Fair value cases allow judges to look at the circumstances at the time of a deal and make an appraisal.

The decision applies to 5.5 million shares whose owners did not support the original deal.

The shareholders originally contended the company was worth $28.61 a share and that the buyers had taken advantage of a fall in the computer company's share price.

Mr Dell and Silver Lake argued the company was worth $12.68 a share and that they had paid a premium at $13.75 a share.

The judge ruled the company's stock was $17.62 a share at the time of the deal.

However, the decision made clear that the court did not believe the buyers had intentionally underpriced their offer.

In 2013 Mr Dell joined forces with Silver Lake to take private the company he founded in a move he said would allow Dell to focus on the needs of customers.

That had been contentious from the start, with investors, including Mr Icahn, arguing it was worth more.

Once it was clear the deal would close, Mr Icahn sent a letter to other investors acknowledging that they had lost, but saying he would continue to seek a higher valuation for Dell.

"We have come to the conclusion that we will not pursue additional efforts to defeat the Michael Dell/Silver Lake proposal, although we still oppose it and will move to seek appraisal rights," he wrote.

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