Dell Shareholders Prepare to Vote on Company’s Future

Carl Icahn looks to derail Michael Dell’s bid as investors get ready to decide on the CEO’s $24.4 billion offer to buy the company.

Michael Dell, after months of debate and a week of wooing shareholders, is set to learn the future of his namesake company when investors return to Texas July 24 to vote on his $24.4 billion bid to buy the company and take it private.

In the mode of a politician in a close race, a key challenge for Michael Dell is getting the vote out. About 20 percent of shareholders have indicated they will vote against the proposal. Just as worrisome, 18 percent of shares hadn’t voted as of earlier this week, according to a Bloomberg report, and any absentees are considered “no” votes. Michael Dell needs to get 42 percent of shares voting for his bid if he and private equity firm Silver Lake Partners are to buy the company he founded 29 years ago and take it private. In a situation too close to call, every vote will count.

Shareholders initially were scheduled to vote on the deal June 18, but the special committee assigned by Dell’s board of directors to investigate options for the company quickly adjourned the meeting. Industry observers believed committee members feared that Michael Dell’s $13.65-per-share offer did not have the necessary investor support and so wanted to give him more time to talk with shareholders.

According to reports, that is what the CEO has done over the past six days, meeting with a range of crucial institutional investors.

In the meantime, activist investor Carl Icahn, who has made a counterproposal that the special committee has refused to declare superior to Michael Dell’s, is continuing to urge shareholders to reject the founder’s offer, saying it undervalued the company and would benefit only Michael Dell and Silver Lake at the expense of investors.

Amid reports that the special committee may postpone the vote again, Icahn sent a letter to the committee urging that the vote go ahead as scheduled.

“We think that—after six months—the time for soliciting is over,” Icahn and executives with Southeastern Asset Management, which is partnering with Icahn on his counterbid, wrote in the letter distributed July 23. “Do not move election day again. This is not a banana republic.”

Michael Dell wants to take the company private in hopes of accelerating its transformation from a PC maker to an enterprise IT solutions and services provider. Dell has spent billions of dollars on dozens of companies to build up its capabilities in everything from storage and networking to security, software and the cloud. Michael Dell has argued that it will be easier to speed up the transformation as a private company that doesn’t have to worry about hitting quarterly financial numbers or about Wall Street analysts.

Michael Dell’s proposal has come under criticism from some major investors since it was first announced in February. Some investors, including Southeastern and T. Rowe Price, have been steadfast in their opposition. Others, like investment firms BlackRock and VanGuard Group, initially opposed the deal but since have indicated they will vote for it.

Icahn is proposing an offer that would pay $14 per share for up to 1.1 billion shares, and the option of buying more shares at $20 down the road. His proposal would keep the company public. In addition, Icahn has said that if he is successful in buying the company, Michael Dell would no longer be CEO. He has been harsh in his criticism of the CEO and the company’s board of directors, calling the offer a “giveaway” to Michael Dell and Silver Lake and the special committee “unconscionable” for recommending it to shareholders.

Shareholders are scheduled to vote at 6 p.m. ET July 24.