Dell Inc. (DELL:US) and Silver Lake Management LLC have secured enough votes for approval of their proposed $24.9 billion leveraged buyout, according to a person with knowledge of the matter.
Holders of two-thirds of the voting shares have indicated their support for the proposed transaction, the largest leveraged buyout since 2007, said the person, who asked not to be identified because the outcome isn’t public.
Michael Dell is poised to have his buyout sewn up after a seven-month contest that left the fate of the world’s third-largest personal-computer maker in doubt for much of the year. Billionaire financier Carl Icahn dropped his opposition to the deal yesterday, removing what for several months was one of the largest obstacles to getting the buyout approved.
“It’s going to make the shareholder meeting a lot easier,” Shannon Cross, an analyst at Cross Research, said of Icahn’s decision.
The results of the voting will be disclosed at a Sept. 12 meeting at Dell’s Round Rock, Texas, headquarters. Three previous shareholder events were adjourned as CEO Dell and Silver Lake lacked the votes they needed to secure approval. David Frink, a spokesman for Dell, declined to comment.
Investors, including Franklin Mutual Advisers and BlackRock Inc. (BLK:US), are supporting the offer after the buyout group sweetened its proposal to $13.75 a share, plus a 13-cent special dividend and guaranteed payment of the company’s third-quarter dividend.
“While we of course are saddened at our losing the battle to control Dell, it certainly makes the loss a lot more tolerable in that as a result of our involvement, Michael Dell/Silver Lake increased what they said was their ‘best and final offer,’” Icahn wrote in a letter yesterday. “As a result of this increase all stockholders are to receive many hundreds of millions of dollars more than the board originally accepted.”
Dell, who serves as chairman and CEO, is pushing to take the PC maker private so he can execute a turnaround plan outside the spotlight of public markets.
“Now we’re going to have to just sit back and see whether Michael Dell succeeds with the company,” Cross said. “It’s going to be good for the industry that there is some certainty about how Dell is going to end up.”
The go-private deal is scheduled to close by the end of Dell’s fiscal third quarter, which ends Nov. 1, and the company isn’t anticipating regulatory hurdles to getting it done, according to a person with knowledge of the process.
Icahn didn’t respond to a message left at his office. He pointed out in the letter that Dell and Silver Lake’s final offer price is still 70 percent below the stock’s 10-year high of $42.38. Icahn had been trying to derail the deal and put forward his own recapitalization plan.
Icahn’s partner, Southeastern Asset Management Inc., said in a statement yesterday it’s “pleased that our efforts contributed to the modest increase in merger consideration Dell stockholders will receive.”
Icahn has had his share of wins and losses with previous proxy fights. An early victory for Icahn, who has long sought to extract value from reluctant companies, was a battle with RJR Nabisco Inc., the second-biggest U.S. tobacco company at the time. The investor bought stock while pushing to split the company’s food and tobacco operations.
Under pressure from Icahn, RJR Nabisco spun off its cigarette arm, R.J. Reynolds Tobacco, in June 1999, and renamed itself Nabisco Holdings Corp. The move freed the company’s food business from the taint of tobacco litigation, paving the way for Philip Morris International Inc. to buy Nabisco for $18.9 billion in June 2000.
In 2008, Icahn threatened a proxy fight with Yahoo! Inc. (YHOO:US) after the company rejected an acquisition offer by Microsoft Corp. (MSFT:US) Icahn eventually won board seats for himself and two other directors, only to leave the board a year later. At that time, the stock price had tumbled by more than a third from when he first purchased shares.
While Icahn’s surrender removes a major obstacle to Michael Dell and Silver Lake’s takeover bid, he said he was still against the proposal and would seek appraisal rights.
In July, the investor disclosed that he had opted for appraisal rights on the 152 million Dell shares that he owned. At the time, he also urged other shareholders to seek appraisal rights under Delaware law, a process that entitles them to receive “fair value” for their shares as determined by the state Chancery Court.
In order to qualify for the appraisal process, stockholders must forgo voting in favor of Michael Dell’s bid and submit a written demand for appraisal before the ballots are cast. Investors must also file a petition with the court within 120 days of the closing date for the buyout to seek independent appraisal of the value of their shares.
“There are clearly some cases where you got substantially more than the deal price because the court in effect found that the deal process was badly flawed,” said Charles Nathan, a partner at RLM Finsbury LLC, a corporate-communications adviser. “My impression is that has always been the aberration rather than the norm.”
Dell rose less than 1 percent to $13.85 at the close in New York, leaving the shares up 37 percent this year, mirroring the increases in the takeover proposal.
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