Michael Dell and Silver Lake Management LLC sweetened their offer for Dell Inc. (DELL:US) to about $24.6 billion, conditional upon new voting rules that would tilt shareholder support in their favor.
Dell’s special committee would need to approve a change to the terms so that shareholders’ abstentions won’t be counted as votes against the deal. The company postponed a vote on the buyout for a second time today, until Aug. 2 at 9 a.m. local time at its headquarters in Round Rock, Texas, according to a statement.
Founder Dell and Silver Lake bumped the offer for the personal-computer maker by 10 cents a share to $13.75 as the group seeks to end a six-month standoff with investors such as Carl Icahn. The buyers need a rule change to clinch the deal because absentees counted as “no” votes under the earlier proposal. Some 18 percent of eligible shares still weren’t voted as of two days ago, a person familiar with the situation said.
“A dime won’t even get you a phone call,” said Jim Kelleher, an analyst at Argus Research who recommends selling Dell shares. “There is a risk that the institutional investors, who were on the fence at $13.65, will not be neutral, but insulted by $13.75 and will swing to team Icahn.”
Dell’s shares fell less than 1 percent to $12.83 at 9:37 a.m. in New York.
Icahn and partner Southeastern Asset Management Inc. have made a series of alternative proposals to derail a takeover by Chief Executive Officer Dell, most recently suggesting that the company repurchase most of the outstanding shares at $14 apiece and offer some warrants.
The new offer from Michael Dell and Silver Lake is 26 percent more than the computer maker’s closing share price of $10.88 on Jan. 11, the last trading day before news of a deal surfaced. A majority of investors, excluding Dell’s 15.6 percent stake in the computer maker, will have to approve for the deal to pass. Dell had originally planned a shareholder vote on the buyout last week and rescheduled that to today after it was unable to secure enough support.
By taking the company he founded in 1984 private, Dell is seeking to transform it into a bigger provider of hardware, software and services for corporate-data centers, after years of ebbing sales and profit. Dell’s initial offer, which had the support of the company’s board, won backing from Institutional Shareholder Services Inc. earlier this month.
Investors who held shares as of June 3 were eligible to vote. Dell and Silver Lake said today that they would be willing to accept a new date of record for shareholders if the special committee deems it necessary.
Since announcing the buyout Feb. 5, the special committee of Dell’s board has argued that the company’s prospects of a turnaround are better outside of the public lens.
Once the world’s top supplier of PCs, Dell has spent about $13 billion on acquisitions (DELL:US) over the past five years to add enterprise computing hardware, software and services, though the deals have yielded little return (DELL:US) for investors. Meanwhile, the company has ceded the fast-growing mobile-computing market to Apple Inc. and devices running Google Inc.’s Android operating system.
Dell’s board predicted another year of lackluster growth in fiscal 2014 as demand for personal computers ebbs, underscoring the urgency behind the company’s decision to be taken private.
Market conditions have only worsened. PC shipments, which account for more than half of Dell’s sales, dropped 10.9 percent in the second quarter, their fifth straight period of decline, research firm Gartner Inc. said this month.
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