What Dell Thought of Alternatives to the Silver Lake Proposal

Dell Inc. directors have repeatedly stressed that they considered all potential ways to improve value for shareholders before accepting a $24.4 billion takeover bid by Michael S. Dell and Silver Lake.

The company’s voluminous proxy statement, filed on Friday, shows their concerns about other alternatives, including a big stock buyback and selling off parts of the business.

Buried in one of the filing’s exhibits is a presentation that JPMorgan Chase bankers delivered to a special committee of Dell’s board on Jan. 18. In it, the bankers listed potential problems with some of the alternatives to a full take-private bid by Silver Lake or another private equity firm.

Some of Dell’s shareholders, including Southeastern Asset Management and the billionaire Carl C. Icahn, have called on the company to turn away from the $13.65-a-share bid by Mr. Dell and Silver Lake. Southeastern has loudly demanded that existing shareholders be given the chance to stay on as investors, through what’s known as a stub. And Mr. Icahn has suggested the possibility of paying out a special dividend to investors.

The two new bids that arose out of a 45-day “go-shop” process, from both Mr. Icahn and the Blackstone Group, contemplate leaving some of Dell publicly traded. Both are essentially variations on a stub, since some of the computer maker will remain publicly traded.

Of the two most commonly mentioned possibilities â€" borrowing money to either buy back lots of stock or to pay out a special dividend â€" JPMorgan said that the moves would seriously limit Dell’s financial flexibility.

Both would severely limit the company’s cash flow, according to the bankers. And the latter would both push Dell’s dividend to levels beyond what its rivals pay and signal that the computer maker has no further places to invest.

The presentation also ran through the benefits and drawbacks of other possibilities, including a sale to a strategic buyer (“strategic buyer for the entire business is unlikely”) and a sale of Dell’s core PC manufacturing arm (“loss of scale and intersegment synergies” and “potentially diminished free cash flow and debt capacity”).

Given those arguments, one wonders what Dell directors will ultimately consider when deliberating the bids by Blackstone and Mr. Icahn.

How Michael Dell’s Takeover Bid Got Hatched

Shareholders may still be irate over the $13.65 a share that Michael S. Dell has bid for the company that bears his name.

But according to the company’s proxy filing on Friday, the price has come a long way from what Mr. Dell‘s partner, Silver Lake, first offered.

Here’s a chronology of Silver Lake’s bidding history, stretching well back to the early days of Dell’s deliberations about whether to go private.

They’re set against what the proxy describes as a series of missed financial projections and increasingly dire assessments by the Boston Consulting Group, which the committee had retained as an additional adviser.

June 15: Southeastern Asset Management, Dell’s biggest outside investor with what is now an 8.4 percent stake, reaches out to Mr. Dell with a novel idea: taking the company private. Southeastern had expressed interest in staying invested in the computer maker in any leveraged buyout and furnished Mr. Dell with a spreadsheet and other information.

July 17 to Aug. 14: Mr. Dell first meets with Silver Lake at an industry conference and begins discussing the idea of taking the company private. Mr. Dell also has conversations with an unnamed private equity firm, dubbed “Sponsor A” in the proxy filing, about a leveraged buyout. (That firm was Kohlberg Kravis Roberts, according to people briefed on the matter.)

Last month, DealBook noted that Mr. Dell had had discussions with top executives at both firms â€" Egon Durban of Silver Lake and George R. Roberts of K.K.R. â€" in Hawaii, where all three men have residences.

On Aug. 14, Mr. Dell formally notified Alex Mandl, the company’s lead independent director, that he was interested in taking the computer maker private. Six days later, the board formed a special committee, with Mr. Mandl as its head.

Months of deliberations within the Dell special committee began, as Silver Lake and K.K.R. began conducting due diligence.

Oct. 23: Both Silver Lake and K.K.R. submitted preliminary offers for the computer company. Silver Lake offered to pay $11.22 a share to $12.16 a share for all of Dell. Its bid envisioned Mr. Dell contributing his 16 percent stake in the company to the deal.

K.K.R. contemplated paying $12 a share to $13 a share. The firm assumed that both Mr. Dell and Southeastern Asset Management, Dell’s biggest outside investor with a roughly 8.4 percent stake, would join the offer. Mr. Dell was also expected to kick in an additional $500 million.

Nov. 2: Bankers at JPMorgan Chase, on behalf of a special committee of Dell’s board, contacted both Silver Lake and K.K.R. about initial feedback on their offers.

Nov. 16 and Nov. 17: Mr. Dell and other top Dell executives met with Silver Lake and K.K.R. to discuss potential revised bids. The company founder told both firms “that they should assume that he would be prepared to participate at the highest price they were willing to pay,” according to the filing.

Dec. 3: A Goldman Sachs analyst published a research note musing on the possibility of Dell going private, sending the company’s shares up to $10.06 a share. Later that day, K.K.R. dropped out of the sale process.

Dec. 4: K.K.R. elaborated, saying that its investment committee “was not able to get comfortable with the risks to the company associated with the uncertain PC market, and the concerns of industry analysts regarding the competitive pressures the company faced.”

Also that day, Silver Lake raised its bid to $12.70 a share and stripped away unspecified conditions from its earlier proposal.

Dec. 5: During a meeting of the special committee, JPMorgan bankers said that they considered Silver Lake and K.K.R. the most likely private equity bidders for Dell. A third investment firm, “Sponsor B” â€" which people briefed on the matter confirmed was TPG Capital â€" was the next most likely to make “a credible proposal.”

Dec. 7: Mr. Mandl of the Dell special committee reached out to TPG to invite it to consider making a bid. The private equity firm agreed, and two days later began looking at the company’s books.

Dec. 10: Mr. Mandl told Silver Lake that its bid of $12.70 was too low and would need to be raised much higher. At that meeting, the investment firm asked for permission to approach Microsoft about providing financing, as well as other potential lenders.

The special committee granted permission for that outreach the next day.

Dec. 14 to Dec. 16: Dell signed confidentiality agreements with a number of potential lenders to Silver Lake. The banks were the Royal Bank of Canada, Credit Suisse, Barclays and Bank of America

Later that day, JPMorgan began talking with Silver Lake about raising its bid.

Jan. 20: Silver Lake floated another revised bid, worth $13.50 a share. But JPMorgan said that likely wouldn’t pass muster.

Jan. 21: Silver Lake began discussing with Mr. Dell the possibility of his rolling over his shares in a deal below the price offered to other shareholders. The company founder said he was willing to value his shares at $13.36 a share to prod Silver Lake into offering $13.60 a share.

Jan. 24: Silver Lake told JPMorgan that it was prepared to offer $13.60 a share as its “best and final offer.”

Later that day, bankers at Evercore Partners, another adviser to the Dell special committee, received a number of unsolicited proposals. One came from an unnamed strategic bidder â€" which people briefed on the matter said was General Electric‘s GE Capital â€" offering to buy Dell’s financial services arm for book value, or about $3.5 billion to $4 billion.

And the Blackstone Group said it was interested in participating in any “go-shop” process aimed at flushing out alternatives to any bid from Mr. Dell and Silver Lake.

Jan. 29: Advisers to Dell’s special committee met with Southeastern and its outside lawyers. During the meeting the asset management firm said that it would oppose any deal in the range of $14 a share to $15 a share that didn’t give existing big investors, such as itself, the chance to roll over their stakes as part of a deal.

Informed of Southeastern’s demands later that day, Mr. Dell and Silver Lake said that they weren’t interested in any deal that would let public investors keep a stake in the company.

Feb. 3: Silver Lake offers to revise its bid in one of two ways. Either it would pay $13.60 a share and let Dell continue to pay its quarterly dividends until the deal closed, or $13.75 a share if Dell halted its dividends.

The special committee reiterated that it wouldn’t accept a price of $13.60 a share.

Feb. 4: Silver Lake contacted the special committee to say that it would be willing to pay $13.65 a share while allowing dividends to continue being paid.

Following a series of meetings, Dell’s special committee ultimately recommended that the full board accept the $13.65-a-share bid.

A little after 11 p.m., the Dell board voted to accept Silver Lake’s final bid. Lawyers for the two sides worked through the night to finalize the necessary legal documents.

Feb. 5: Dell and the buyers signed contracts and formally announced the deal.

How Michael Dell’s Takeover Bid Got Hatched

Shareholders may still be irate over the $13.65 a share that Michael S. Dell has bid for the company that bears his name.

But according to the company’s proxy filing on Friday, the price has come a long way from what Mr. Dell‘s partner, Silver Lake, first offered.

Here’s a chronology of Silver Lake’s bidding history, stretching well back to the early days of Dell’s deliberations about whether to go private.

They’re set against what the proxy describes as a series of missed financial projections and increasingly dire assessments by the Boston Consulting Group, which the committee had retained as an additional adviser.

June 15: Southeastern Asset Management, Dell’s biggest outside investor with what is now an 8.4 percent stake, reaches out to Mr. Dell with a novel idea: taking the company private. Southeastern had expressed interest in staying invested in the computer maker in any leveraged buyout and furnished Mr. Dell with a spreadsheet and other information.

July 17 to Aug. 14: Mr. Dell first meets with Silver Lake at an industry conference and begins discussing the idea of taking the company private. Mr. Dell also has conversations with an unnamed private equity firm, dubbed “Sponsor A” in the proxy filing, about a leveraged buyout. (That firm was Kohlberg Kravis Roberts, according to people briefed on the matter.)

Last month, DealBook noted that Mr. Dell had had discussions with top executives at both firms â€" Egon Durban of Silver Lake and George R. Roberts of K.K.R. â€" in Hawaii, where all three men have residences.

On Aug. 14, Mr. Dell formally notified Alex Mandl, the company’s lead independent director, that he was interested in taking the computer maker private. Six days later, the board formed a special committee, with Mr. Mandl as its head.

Months of deliberations within the Dell special committee began, as Silver Lake and K.K.R. began conducting due diligence.

Oct. 23: Both Silver Lake and K.K.R. submitted preliminary offers for the computer company. Silver Lake offered to pay $11.22 a share to $12.16 a share for all of Dell. Its bid envisioned Mr. Dell contributing his 16 percent stake in the company to the deal.

K.K.R. contemplated paying $12 a share to $13 a share. The firm assumed that both Mr. Dell and Southeastern Asset Management, Dell’s biggest outside investor with a roughly 8.4 percent stake, would join the offer. Mr. Dell was also expected to kick in an additional $500 million.

Nov. 2: Bankers at JPMorgan Chase, on behalf of a special committee of Dell’s board, contacted both Silver Lake and K.K.R. about initial feedback on their offers.

Nov. 16 and Nov. 17: Mr. Dell and other top Dell executives met with Silver Lake and K.K.R. to discuss potential revised bids. The company founder told both firms “that they should assume that he would be prepared to participate at the highest price they were willing to pay,” according to the filing.

Dec. 3: A Goldman Sachs analyst published a research note musing on the possibility of Dell going private, sending the company’s shares up to $10.06 a share. Later that day, K.K.R. dropped out of the sale process.

Dec. 4: K.K.R. elaborated, saying that its investment committee “was not able to get comfortable with the risks to the company associated with the uncertain PC market, and the concerns of industry analysts regarding the competitive pressures the company faced.”

Also that day, Silver Lake raised its bid to $12.70 a share and stripped away unspecified conditions from its earlier proposal.

Dec. 5: During a meeting of the special committee, JPMorgan bankers said that they considered Silver Lake and K.K.R. the most likely private equity bidders for Dell. A third investment firm, “Sponsor B” â€" which people briefed on the matter confirmed was TPG Capital â€" was the next most likely to make “a credible proposal.”

Dec. 7: Mr. Mandl of the Dell special committee reached out to TPG to invite it to consider making a bid. The private equity firm agreed, and two days later began looking at the company’s books.

Dec. 10: Mr. Mandl told Silver Lake that its bid of $12.70 was too low and would need to be raised much higher. At that meeting, the investment firm asked for permission to approach Microsoft about providing financing, as well as other potential lenders.

The special committee granted permission for that outreach the next day.

Dec. 14 to Dec. 16: Dell signed confidentiality agreements with a number of potential lenders to Silver Lake. The banks were the Royal Bank of Canada, Credit Suisse, Barclays and Bank of America

Later that day, JPMorgan began talking with Silver Lake about raising its bid.

Jan. 20: Silver Lake floated another revised bid, worth $13.50 a share. But JPMorgan said that likely wouldn’t pass muster.

Jan. 21: Silver Lake began discussing with Mr. Dell the possibility of his rolling over his shares in a deal below the price offered to other shareholders. The company founder said he was willing to value his shares at $13.36 a share to prod Silver Lake into offering $13.60 a share.

Jan. 24: Silver Lake told JPMorgan that it was prepared to offer $13.60 a share as its “best and final offer.”

Later that day, bankers at Evercore Partners, another adviser to the Dell special committee, received a number of unsolicited proposals. One came from an unnamed strategic bidder â€" which people briefed on the matter said was General Electric‘s GE Capital â€" offering to buy Dell’s financial services arm for book value, or about $3.5 billion to $4 billion.

And the Blackstone Group said it was interested in participating in any “go-shop” process aimed at flushing out alternatives to any bid from Mr. Dell and Silver Lake.

Jan. 29: Advisers to Dell’s special committee met with Southeastern and its outside lawyers. During the meeting the asset management firm said that it would oppose any deal in the range of $14 a share to $15 a share that didn’t give existing big investors, such as itself, the chance to roll over their stakes as part of a deal.

Informed of Southeastern’s demands later that day, Mr. Dell and Silver Lake said that they weren’t interested in any deal that would let public investors keep a stake in the company.

Feb. 3: Silver Lake offers to revise its bid in one of two ways. Either it would pay $13.60 a share and let Dell continue to pay its quarterly dividends until the deal closed, or $13.75 a share if Dell halted its dividends.

The special committee reiterated that it wouldn’t accept a price of $13.60 a share.

Feb. 4: Silver Lake contacted the special committee to say that it would be willing to pay $13.65 a share while allowing dividends to continue being paid.

Following a series of meetings, Dell’s special committee ultimately recommended that the full board accept the $13.65-a-share bid.

A little after 11 p.m., the Dell board voted to accept Silver Lake’s final bid. Lawyers for the two sides worked through the night to finalize the necessary legal documents.

Feb. 5: Dell and the buyers signed contracts and formally announced the deal.

The Path to a Three-Way Race for Dell

Though the race for Dell Inc. now has narrowed to three contestants, there were many more who arose over a month ago.

Advisers to Dell directors spoke to 71 potential bidders during a 45-day period aimed at flushing out alternatives to a $24.4 billion offer by Michael S. Dell and the investment firm Silver Lake, according to a securities filing by the company on Friday.

The long-awaited proxy filing includes one of the lengthiest recaps of a merger’s history in recent memory, detailing over 26 pages the months-long negotiations that led to the Dell transaction. But it especially shines a light on the 45-day “go-shop” period, which wrapped up last week with two preliminary bids by the Blackstone Group and the billionaire Carl C. Icahn.

Dell is expected to point to the efforts recounted in the proxy as proof that its board fought hard to find the best possible outcome for shareholders, as several investors continue to fight the existing $13.65-a-share bid by Mr. Dell and Silver Lake as far too low.

According to Friday’s filing, bankers at Evercore Partners began reaching out to a panoply of possible strategic and financial buyers shortly after the deal with Mr. Dell was signed on Feb. 5. In total, the investment bank spoke to 21 other companies, 20 private equity firms and 30 other potential investors.

According to the filing, several potential suitors ultimately were rejected because they were interested only in a piece of Dell’s businesses. A special committee of the company’s board was primarily interested in selling the company as a whole, mirroring the proposal by Mr. Dell and Silver Lake.

On Feb. 6, Blackstone contacted Evercore, saying it was interested in participating in the go-shop process. The private equity giant had already expressed interest in potentially bidding for Dell the previous month, after word of the company’s deal deliberations emerged in the press.

A month later, Blackstone, together with potential partners, met with Mr. Dell to further discuss a potential bid.

Other private equity shops emerged as well. The filing names a “Sponsor B” that had previously held discussions with Dell directors late last year, willing to take another look at the company despite passing on making a bid the first time. People briefed on the matter identified that firm as TPG Capital.

Ultimately, TPG decided again not to participate in any bids.

A “Sponsor C” also expressed preliminary interest, but ultimately decided to walk away after inspecting Dell’s books.

A corporate bidder, identified as “Strategic Party A,” contacted Evercore on Feb. 8 to say it was interested in information about Dell’s financial services arm. That company â€" which people briefed on the matter said was General Electric‘s GE Capital â€" later expressed interest in working with whatever group Blackstone convened to make a bid.

At least three other strategic buyers sought to gain access to Dell’s books. Most were denied access because they appeared interested in only bidding for part of the company.

Mr. Icahn, who had amassed a position in Dell, first contacted Evercore on Feb. 26 about signing a confidentiality agreement. Over a week later, the billionaire wrote to the Dell special committee, disclosing owning a “substantial” stake and warning that he would fight the proposed takeover by Mr. Dell.

By March 11, Dell advisers gave Mr. Icahn access to Dell’s private financial information.

By the go-shop’s deadline of March 22, Evercore bankers received three expressions of interest. One was from GE Capital, proposing to buy Dell Financial Services only if combined with any takeover proposal, including Mr. Dell’s.

Blackstone also submitted an offer, now known to be over $14.25 a share and which would leave an unspecified portion of Dell public to let investors continue owning a piece of the company if they so wished. The firm disclosed that it was working with Francisco Partners and Insight Venture Partners.

In a twist, however, Blackstone demanded that the Dell special committee reimburse the costs of assembling that rival bid, up to $25 million. That request was granted on Monday.

Mr. Icahn submitted his offer, in which he would buy about 58.1 percent of the company for about $15.6 billion, or $15 a share. His offer envisioned several major shareholders, including Southeastern Asset Management and T. Rowe Price, contributing their stakes as well.

Privately, some Dell advisers considered Mr. Icahn’s proposal a non-starter and a place-holder to keep negotiating with the special committee, according to people briefed on the matter. The hedge fund manager has said that he is reviewing Blackstone’s offer as well, leaving the door open to joining that other consortium.

Toys ‘R’ Us Withdraws I.P.O.

The stock market may be on a roll, but Toys “R” Us will not be joining the fun.

The retailer on Friday asked to withdraw its filing for an initial public offering. The company cited “unfavorable market conditions,” and the recent management changes.

The withdrawal was not a surprise. A year ago, a Toys “R” Us I.P.O. seemed to many to be like a wind-up toy that was running out of steam. As Stephanie Clifford and DealBook’s Peter Lattman wrote at that time, the chain was “grappling with how to grow”:

The company is facing management defections, a decline in same-store sales and relentless competition from Walmart and Amazon

Toys “R” Us had first filed to go public in May 2010. An offering would have given its private equity backers an exit from one of the most famous deals of the buyout boom era in the years before the financial crisis. The private equity giants Bain Capital and Kohlberg Kravis Roberts & Company along with the real estate developer Vornado Realty Trust acquired the company for $6.6 billion in 2005.

Also on Friday, the company, which operates 1,540 stores, said that fourth-quarter net sales fell 2.6 percent, to $5.77 billion. Net earnings for the quarter slid to $239 million, compared with $343 million in the previous year â€" a decline the company attributed largely to a $34 million increase in interest expense and a $33 million increase in income tax expense.

Jerry Weissman, Silicon Valley’s Storyteller

Jerry Weissman may produce more revenue than almost any director in history. His big successes haven’t been plays or movies, though. For more than two decades, Mr. Weissman, a former television and stage director, has coached the executives of technology companies on the theater of the initial public offering.

Mr. Weissman’s company, Power Presentations, works with chief executives on the “roadshow,” a major step toward a stock offering. The presentations consist of speeches, slide shows and question-and-answer sessions with prospective investors. Getting that story right builds enthusiasm for a company’s shares, sending initial stock prices higher.

His clients have included Intuit, eBay, Cisco, Dolby, Netflix and most recently Trulia, the real estate Web site. His clients also include executives at established companies like Microsoft, where he helps with other kinds of presentations, like conference speeches and product marketing.

Mr. Weissman, who is based in Burlingame, Calif., has written several books on his craft, the most recent of which is “Winning Strategies for Power Presentations.” I caught up with him recently, in between client meetings.

Q.

How different is an I.P.O. pitch from a conference presentation

A.

I have worked on I.P.O.’s, private placements, product launches, board meetings, keynotes, conference talks and partner meetings. The goal is always the same: Tell a crisp, clean story; make sure your PowerPoint doesn’t become “death by PowerPoint” by cluttering things up or confusing the audience; show poise and confidence; and show you can handle tough questions.

Q.

If it’s that easy, how do you stay employed

A.

They’ve been selling stuff to a different audience, people who want to buy software or computers. They have to rotate the benefit of their product to a different audience. If the audience is potential investors, those people have only two interests: return on investment and risk management.

Most of my clients come at the task of telling their story like engineers, in a logical fashion. But they assign six slides to Tom, eight points from Dick and four items from Harry, and that creates a patchwork of ideas that don’t flow and ideas that don’t match each other. Then they see the audience squirm at what they’ve done, and that raises their discomfort level, which the audience feels. After that, it’s lost.

They need to merge the logic with the art, and that goes back 2,300 years, to Aristotle. Give things a beginning, a middle and an end.

Q.

How do you do that

A.

You set the context by defining who the audience is and what you want to achieve by talking to them. Then you let the ideas flow about what you can say, you brainstorm like crazy without throwing out anything. You distill that into four or five key ideas. Then you put it into a logical flow that is meaningful for what the audience wants.

Q.

How long have you been doing this

A.

It will be 25 years on Sept. 1.

Q.

What has changed

A.

My specialty is I.P.O.’s. The biggest change there is NetRoadshow, which is a Web site where people post a video of their pitch. That means they have to put something tight into the can. Then they go on the road, and if they’re good, it’s 90 percent audience questions about investing. If it’s not good, it’s all about how people didn’t understand what they were talking about. So, I train them to make a video, then I train them for a Q.&A. session that is tougher than anything they’ll face on the road.

The other change is that sometimes people just post slides on the Web, and get on the phone and talk. Either way, the new media means they have to learn to tell stories without making eye contact. It’s even more important that you have a clear story that flows. In the questions, you listen to make sure you understand the key issues. You paraphrase the question to level the playing field for the rest of the audience, and to make sure it addresses the question. And you pitch yourself, so you can end up saying “…and that’s why we are the best.”

Q.

How is the I.P.O. market doing

A.

It is smaller, compared with 10 years ago, but there is lots of other kinds of work. If I’m a bellwether, though, I’d say I have more companies knocking on my door for I.P.O. training this year than last, and more last year than the year before.

Glass Lewis Urges MetroPCS Investors to Reject T-Mobile Deal

MetroPCS, at least you have Egan Jones.

The cellphone service provider was dealt another blow to its proposed merger with T-Mobile USA on Friday, as a second major proxy advisory firm recommended that investors reject the deal.

In its report, Glass Lewis & Company found the proposed transaction lacking in significant ways, from the way that MetroPCS agreed to the T-Mobile deal to the amount of compensation that shareholders will receive.

The firm joined its larger rival, Institutional Shareholder Services, in casting aspersions on the transaction. Both sided with two big shareholders who hold over 12 percent of MetroPCS’ stock and have called on the company to demand better terms or walk away.

The combined opposition of I.S.S. and Glass Lewis raises the pressure on MetroPCS and T-Mobile to sweeten the terms of the merger or risk defeat. MetroPCS shareholders are scheduled to vote on April 12.

Together, I.S.S. and Glass Lewis are considered the major players in the field of proxy advisory firms, which counsel clients like big institutional investors on how to vote in corporate matters. While the influence of the two has waned over the years, their recommendations still carry weight with many shareholders.

T-Mobile’s parent, Deutsche Telekom, is weighing whether to offer concessions or to walk away from the deal, people briefed on the matter said this week.

It isn’t clear whether the German telecommunications giant is willing to give up further control of the combined company or take a chance that it can strike a deal for its American subsidiary with another suitor, including either a newly revitalized Sprint or Charles Ergen’s Dish Network.

Like I.S.S., Glass Lewis raised questions about the terms of the deal, including a payout to shareholders of over $4 a share and a cumulative 26 percent stake in the combined company. It also contended that the amount of debt the merged entity would owe could clamp down on its ability to make investments in new business opportunities.

In some ways, Glass Lewis went further than I.S.S. in its criticisms, questioning why MetroPCS didn’t pursue a full auction of itself before settling on a deal with T-Mobile. While the proxy adviser acknowledged the upsides of the merger â€" helping the largely regional MetroPCS become a nationwide carrier â€" the firm argued that T-Mobile and Deutsche Telekom appeared to have the upper hand in negotiations throughout the process.

“As constructed, the agreement appears to undervalue MetroPCS’ contribution to the combined company and offers shareholders a merger consideration that does not fairly value MetroPCS in a takeover by Deutsche Telekom,” Glass Lewis wrote in its report.

SAC Capital Manager Arrested in Insider Trading Case

Federal agents have arrested a SAC Capital Advisors portfolio manager, the most senior employee at the giant hedge fund ensnared government’s vast insider trading investigation.

Michael Steinberg, 40, was arrested at his Park Avenue apartment early Friday morning and taken out of his building in handcuffs. He has worked at SAC since 1997 and became one of the firm’s senior portfolio managers, focusing on technology stocks.

He is expected to make an appearance in Federal District Court in Manhattan on Friday before Judge Richard Sullivan.

“Michael Steinberg did absolutely nothing wrong,” said Barry H. Berke, a lawyer for Mr. Steinberg. “Caught in the crossfire of aggressive investigations of others, there is no basis for even the slightest blemish on his spotless reputation. Mr. Steinberg is thankful for all the people who have continued to stand by him and believe in his innocence.”

The charges against Mr. Steinberg had widely been expected.

Last September, a former SAC analyst, Jon Horvath, who worked directly for Mr. Steinberg pleaded guilty to being part of an insider trading ring that illegally traded the technology stocks Dell and Nvidia. As part of his guilty plea, he implicated Mr. Steinberg, saying that he gave the confidential information to his SAC boss and that they traded based on the secret financial data about those two companies.

In recent months, Mr. Horvath has met with authorities and provided them with information about his former boss.

The government has previously identified Mr. Steinberg, a technology stock specialist in SAC’s Sigma Capital unit, as a co-conspirator in a case involving Mr. Horvath and two former hedge fund managers at other firms, Todd Newman and Anthony Chiasson. A jury convicted Mr. Newman and Mr. Chiasson in December on charges that they traded shares of Dell while in possession of secret information about the technology company.

Mr. Steinberg has been named in a superseding indictment in Mr. Newman and Mr. Chiasson’s case, according to person familiar with Mr. Steinberg’s case.

Including Mr. Steinberg, at least nine current or former SAC employees have been tied to allegations of insider trading while working there. Four have pleaded guilty to federal charges.