Hedge fund manager Einhorn blasts Dell's buyout plan

Thu Feb 21, 2013 4:52pm EST
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By Poornima Gupta

SAN FRANCISCO (Reuters) - Hedge fund manager David Einhorn had some sharp words on Thursday for both Dell Inc DELL.O and founder Michael Dell on his plan to take the company private.

Einhorn, who has mounted a campaign to get Apple Inc (AAPL.O: Quote) to share more of its $137 billion cash pile, used the leveraged buyout of Dell as an example of a cash policy that is shareholder unfriendly.

Michael Dell has struck a deal to take private the No. 3 personal computer maker he created in a college dorm room in 1984. The founder is partnering with private equity house Silver Lake and Microsoft Corp (MSFT.O: Quote) but the $24.4 billion deal is being opposed by some of Dell's major shareholders, including Southeastern Asset Management, which said the deal substantially undervalues the company.

Now, Einhorn - an influential voice on Wall Street - is expressing his disgust.

"Dell's go-private effort shows the disingenuous nature of hoarding cash," he said during a conference call where he detailed the benefits of distributing perpetual preferred stock - his favored way of rewarding shareholders of Apple.

The 44-year-old hedge fund manager, who made his name and fortune by predicting the collapse of Lehman Brothers, said his firm was a large shareholder of Dell last year but sold the shares after he found the company's capital allocation strategy "unappealing."

Einhorn said he made the decision to sell after he was told Dell's foreign cash couldn't be repatriated and domestic cash was needed for strategic acquisitions and other operational moves.

Attributing the slide in Dell's shares to the frustration of shareholders, he said the depressed price of the stock created an opportunity for Michael Dell.   Continued...

David Einhorn, president of Greenlight Capital, speaks during the Sohn Investment Conference in New York, in this file photo from May 16, 2012. REUTERS/Eduardo Munoz/Files