Dell Board May Delay Vote on CEO’s $24.4 Billion Buyout Bid

By Jeffrey Burt  |  Posted 2013-07-16

Dell Board May Delay Vote on CEO’s $24.4 Billion Buyout Bid

Dell’s board of directors reportedly is considering delaying the July 18 shareholder vote on CEO Michael Dell’s controversial $24.4 billion bid to buy the company and take it private.

Citing an unnamed “person with direct knowledge of the situation,” Bloomberg said July 16 the special committee assigned by the directors to investigate the company’s future may postpone the vote for a week to give it time to seek a higher bid or to gain more support for the proposal put forth by Michael Dell and Silver Lake Partners.

The New York Times said the special committee has been making it clear for days that it would prefer to postpone the shareholder vote than see the bid rejected.

The news comes two days before shareholders are set to vote on the Dell-Silver Lake offer, and as activist investor Carl Icahn makes an aggressive effort to derail the deal and gain support for his counteroffer, which among other things would keep Dell as a public company. Icahn, who owns 8.7 percent of Dell’s share, is now the largest outside investor in the company.

Publications such as the Wall Street Journal and Forbes are reporting that the shareholder vote is too close to call, with major investors like T. Rowe Price, Southeastern Asset Management—which also is a partner in Icahn’s counterbid—and investment firm BlackRock among those that are casting votes against Michael Dell’s $13.65-per-share offer.

Michael Dell in the past has refused to increase his offer, noting the 25 percent premium shareholders would realize with the proposal. However, some industry observers believe that given how close this vote appears to be, that could change.

“I think [a delay in the vote] also opens up the possibility that the Michael Dell team will come back and potentially raise their offer,” IDC Chief Research Officer Crawford Del Prete told Bloomberg in a televised interview.

Del Prete said there are some shareholders who would be happy to accept Michael Dell’s offer, take the money now and not risk any more deterioration in the stock price, and those shareholders will get more anxious as the voting day nears. However, delaying the vote would indicate the board of directors’ nervousness about the outcome of a vote.

“It basically says they want to take more time and weigh their options,” he said. “It definitely opens up the possibility that they want to do some more selling to existing shareholders to try to sell their story.”

Dell Board May Delay Vote on CEO’s $24.4 Billion Buyout Bid

However, getting more money for the company may not happen. Michael Dell and Silver Lake officials reportedly are pushing back at the idea of raising the price of their offer. The news site AllThingsD, citing “sources familiar with the most recent conversations” among the two said that Michael Dell and Silver Lake are “prepared to see the deal blow up” rather than raise their bid.

Michael Dell’s bid to buy the world’s third-largest PC maker and take it private has faced headwinds since it was announced in February. Dell executives are trying to lessen the company’s reliance on the shrinking PC market by becoming more of an enterprise IT solutions and services provider, and the founder and CEO has argued that he could accelerate those efforts as a private company with it out of the glare of Wall Street.

However, some shareholders have argued that the $13.65-per-share price undervalues Dell and have vowed to vote against it.

Icahn and Southeastern are offering a counterbid that calls for the company to buy up to 1.1 billion shares for $14 each, with a promise to shareholders to allow them to buy more shares in the future if the stock price reaches $20. Icahn is pushing the board’s special committee, which is backing Michael Dell’s bid, to declare Icahn’s bid superior and to let shareholders vote on it. At the same time, he is urging shareholders to vote against Michael Dell’s offer.

The special committee has questioned Icahn’s financing and has declined to call the deal superior to Michael Dell’s. In addition, the CEO got a boost from the influential Institutional Shareholders Services (ISS), which is recommending that investors accept his offer.

The special committee on July 16 reiterated their support of Michael Dell’s bid. In a letter to shareholders, the committee said a sale to the CEO and Silver Lake is still a better option than Icahn’s bid, which would foist even more debt on a company “already facing significant challenges from competition and from the rapid pace of technological change."

IDC’s Del Prete also questioned Icahn’s bid, saying he believed the investor was too optimistic in his vision of Dell, which is still being impacted by the contracting global PC market and has yet to see strong results from its enterprise efforts.

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