Michael Dell's Sweetened Offer Should Close the Deal: Analysts

 
 
By Jeffrey Burt  |  Posted 2013-08-03 Email Print this article Print
 
 
 
 
 
 
 

The new offer, which includes more money for shareholders and new voting rules, will benefit both the CEO and investors, they say.

The latest agreement between Michael Dell and the special committee charged with steering the PC maker's future should be enough for the CEO to get the necessary shareholder votes to buy the company and take it private, according to industry observers.

It also should be enough to keep activist investor Carl Icahn at bay, despite his furious efforts over the past few months to derail the bid.

"This is a compromise that will be beneficial to both [Michael] Dell and [financial backer] Silver Lake and to Dell's shareholders," Charles King, principal analyst with Pund-IT Research, told eWEEK. "The momentum is heading back toward Michael Dell. Icahn might threaten legal action, but I don't know how realistic that is."

For the past several weeks, it appeared that the $24.4 billion offer put together by Michael Dell and Silver Lake Partners for Dell's namesake company was heading for the ditch, undone by a block of large institutional investors—including Icahn—who promised to vote against it. They claimed the money offered undervalued the company and a voting rule that would make it nearly impossible for the CEO to get the necessary 42 percent of shares in his favor.

However, after back-and-forth negotiating in public between Michael Dell and the special committee, a near-constant barrage of criticism from Icahn and months of behind-the-scenes shareholder lobbying, the two sides reached an agreement Aug. 2 that will bring more money to investors and ease the onerous voting rules for Michael Dell.

The CEO and Silver Lake agreed to increase the price from $13.65 per share to $13.75, plus another 13 cents per share when the deal closes, and another 8 cent-per-share in a third-quarter dividend, all of which added about another $470 million for investors.

In return, the special committee agreed to a change in the voting rules that only shares voted for or against the deal would be counted. Previously, any share not voted would be automatically put into the "no" column. About 25 percent of shares had yet to be voted, making it almost impossible for Michael Dell to get the necessary 42 percent of shares on his side. The CEO had argued it was unfair that such a percentage of non-voters could spike the deal even if those shares in favor of the deal outnumbered those against.

Icahn and other opponents represent about 20 percent of the shares.

Rob Enderle, principal analyst with The Enderle Group, said making the rule change was critical.

"It it all hinges on the rule," Enderle said in an email to eWEEK. "The combination of summer, folks not bothering to vote and some screwy belief that you might make more money if you didn't vote were creating too many no votes even though most appeared to actually want the deal."

Michael Dell's bid was controversial from the moment it was announced in February, with some investors saying the company was worth more than what was being offered. Pund-IT's King said the CEO's decision to raise the price of the deal will help swing a number of those investors in favor of the bid.

Icahn, who with Southeastern Asset Management has made its own bid to buy Dell, is undeterred by the new deal. In a Twitter post Aug. 2, he said: "We are pleased to have won another battle in the Dell war, but the war itself is far from over. More to follow."

 



 
 
 
 
 
 
 
 
 
 
 
 
 

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