Dell's decision to sell itself for $US24.4 billion ($A23.86 billion) to a group led by its founder and CEO is being ridiculed by a major shareholder, who estimates the slumping computer maker is really worth $US42 billion.
The missive launched on Friday by Southeastern Asset Management Inc threatens to complicate Dell Inc's efforts to end its 25-year history as a public company.
In a letter to Dell's board of directors, Southeastern CEO O Mason Hawkins threatened to lead a shareholder mutiny unless the company came up with an alternative to the deal announced earlier this week.
Hawkins vowed to wield Southeastern's 8.5 per cent stake to thwart the deal currently on the table.
Only Michael Dell, the company's eponymous founder and CEO, owns more stock with a roughly 14 per cent stake.
Under Dell's proposal, Southeastern and other stockholders will be paid $US13.65 per share to leave the company in control of Michael Dell, who founded the business in his University of Texas dorm room in 1984.
Michael Dell is contributing about $US4.5 billion in stock and cash to help pay for the deal.
The rest of the money would be supplied by the investment firm Silver Lake, loans from Microsoft and a litany of banks.
The loans will burden Dell with debts that could leave the company with less money to invest in innovation and acquisitions.
Hawkins derided the price of the proposed sale as "woefully inadequate" and laid out a scenario that values Dell at $US23.72 per share, or about $US42 billion.
The per-share amount mirrors Dell's stock price six years ago, when Michael Dell returned for a second go-round as the company's CEO.
In statement late on Friday, Dell said it was standing behind the merits of the current deal.
The company, based in Round Rock, Texas, emphasised that its board had worked with financial advisers to explore a wide range of alternatives before agreeing to sell the company for $US24.4 billion a price 80 per cent below Dell's top market value of more than $US150 billion at the peak of the dot-com boom 13 years ago.
"The transaction offers an attractive and immediate premium for stockholders and shifts the risks facing the business to the buyer group," Dell said.
To allow for the possibility of something better coming along, Dell's board had already opened a 45 day window for other potential bidders to emerge.
Hawkins is worried other suitors will be discouraged from bidding because Michael Dell already has lined up a deal to buy the company for what Southeastern believes to be a steep discount.
The transaction that Michael Dell and Silver Lake negotiated "clearly represents an opportunistically timed bid to take the company private at a valuation far below Dell's intrinsic value, and deprives public shareholders of the ability to participate in the company's substantial future value creation," Hawkins wrote.
Michael Dell and Silver Lake contend the company will be in a better position to overhaul its operations as a privately held company.
The proposed sale at $US13.65 per share is 25 per cent above where Dell's stock stood last month, before word of the buyout negotiations leaked out in the media.
Dell's stock has plunged during the past year as PC sales have slumped amid the technological upheaval caused by the growing popularity of smartphones and tablet computers.
Dell's shares rose 10 cents on Friday to close at $US13.63.
Southeastern was approached for comment.
In a regulatory filing on Friday, Southeastern said it had spent about $US2.28 billion to accumulate more than 147 million shares of Dell. That means Southeastern would lose about $US270 million on its Dell holdings if the company is sold at $US13.65 per share.
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