“Our numbers suggested Dell should be worth a premium to the $13.65 offer from management, but then a potential acquirer with access to non-public information decided to end its quest to acquire Dell at a higher price,” Nygren said in an e-mailed letter, referring to Blackstone. “Since they had information we didn’t, we believed it was prudent to assume they might be right.”
Blackstone, which had made a non-binding offer in March challenging plans by Michael Dell and Silver Lake Management LLC to take the computer maker private, pulled out of the bidding on April 20 amid concerns about a worsening global slump in personal computer sales. Personal-computer shipments plummeted 14 percent in the first quarter, the worst decline since researcher IDC began tracking data in 1994.
Some of Dell’s largest shareholders, including Southeastern Asset Management Inc. and T. Rowe Group Inc., have opposed the Silver Lake offer, arguing that the proposed purchase price is too low.
Dell gained (DELL:US) 1.4 percent to $13.27 at 12:54 p.m. New York time. The stock had risen as high as $14.64 on March 25, when Dell said it received rival offers during its go-shop period that may be superior to the original bid.
David Frink, a spokesman for Dell, declined to comment on Nygren’s decision, as did T. Rowe Price spokesman Brian Lewbart. Southeastern Asset Management, the largest outside shareholder in the company after founder Michael Dell, also declined to comment, said spokesman Jed Repko.
Blackstone had assembled bankers and buyout engineers, as well as dozens of potential co-investors and consultants since April 8 to grill Round Rock, Texas-based Dell’s executives about divisions and model its prospects, people familiar with the situation said this month.
Its exit from Dell bidding followed reports that International Business Machines Corp. (IBM:US) is in talks to sell its low-end server division to Lenovo Group Ltd. (992) Servers have been a bright spot for Dell, posting 18 percent sales growth in the most recent quarter.
Nygren, who is based in Chicago, held Dell shares in three Oakmark funds he co-manages, the $8.7 billion Oakmark Fund, the $3.5 billion Oakmark Select Fund and the $814 million Oakmark Global Select Fund. All three funds have outperformed at least 93 percent of rivals over the past five years, according to data compiled by Bloomberg.
“At Oakmark, we have always paid extra attention to the actions of investors who have access to information public investors don’t have,” Nygren wrote in his letter. Nygren said he was “surprised and disappointed” when Blackstone withdrew after getting a closer look at Dell’s financial situation.
Southeastern, which owns almost 7 percent of Dell, has argued that Dell is worth at least $24 a share. In a February letter, the asset manager described the original buyout offer as “an effort to acquire Dell at a substantial discount to intrinsic value at the expense of public shareholders.”
The Memphis, Tennessee-based company has said several times it wanted to remain a Dell shareholder so it could participate in the future growth of the business.
T. Rowe Price, based in Baltimore, Maryland, owns 4.7 percent of Dell, according to data compiled by Bloomberg.
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