Dell Sets Out Case For Buyout

Apr 2 2013 | 11:08am ET

After acknowledging that offers from the Blackstone Group and Carl Icahn could prove better, Dell Inc. went to bat last week for the buyout deal led by its founder and private equity firm Silver Lake Partners.

In a 274-page proxy filed Friday, Dell said it needs a complete makeover to survive in an industry, computer-making, that it said was in a downward spiral. And the $24.4 billion going-private deal offered by Michael Dell and Silver Lake would allow it to do so, it added.

The proxy was full of grim details, including the disclosures that its own revenue projections for this fiscal year fell 15% in the six months between July and January, and that it missed its own internal projections for revenue for the past seven quarters. Boston Consulting Group has estimated that Dell's revenue will keep falling through 2016.

The radical surgery needed to save Dell, Michael Dell argues, could make those woes temporarily worse, an impossibility as a publicly-traded company.

"Implementing such initiatives would require additional investments that could weaken earnings and cause greater volatility in the performance of the common stock," Dell said, repeating its founder's case. "Mr. Dell stated his belief that such initiatives, if undertaken as a public company, would be poorly received by the stock market because they would reduce near-term profitability, raise operating expenses and capital expenditures, and involve significant risk."

And despite the prospective bids from Blackstone and Icahn, Dell said two other private-equity giants rejected an approach due to the uncertainty surrounding Dell's personal-computer business. According to The Wall Street Journal, those firms were Kohlberg Kravis Roberts and TPG Capital.

The filing begins a five-to-10-week review process by the Securities and Exchange Commission.

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