By Greg Roumeliotis and Soyoung Kim
July 16 Dell Inc founder Michael Dell
and his private equity partner Silver Lake would not raise their
$24.4 billion bid for the world's No. 3 PC maker even if a vote
on their offer is delayed, two people familiar with the matter
said on Tuesday.
The outcome of a shareholder vote scheduled for Thursday on
the offer is too close to call. Dell may decide to delay the
vote to gain time to win support for the deal, a person familiar
with the matter said earlier on Tuesday.
With a nearly 16 percent stake in Dell and ties going back
three decades to the creation of the company out of his college
dorm room, Michael Dell is seen as having much more at stake in
the deal going through than Silver Lake, a financial investor
that often walks away from deals.
During late-stage negations leading up to the Feb. 5 buyout
agreement, Michael Dell had to subsidize the returns of Silver
Lake, which declined to raise its contribution further. The Dell
founder agreed to roll over his shares at $13.36 each versus the
$13.65 offered to shareholders.
But the two people with knowledge of Michael Dell's and
Silver Lake's plans said on Tuesday that any decision to
increase the offer now would be taken jointly and that both
parties have decided there will not be any bump in their
Activist investor Carl Icahn has spearheaded opposition to
the bid and presented a proposal of his own with Southeastern
Asset Management Inc, although this will not go to a vote on
Dell's special board committee will likely make a decision
by Thursday morning, based on whether enough votes have been
cast to indicate the buyout would be blocked. Dell's board has
set up the special committee to independently assess the best
option for shareholders, without influence from Michael Dell,
who is the company's chairman and chief executive officer.
Officials for Dell and its special board committee, and
Silver Lake, declined to comment.
Dell shares ended trading on Tuesday down 1 percent to
$13.02. That is below Michael Dell and Silver Lake's offer of
$13.65 per share, indicating that more investors now see the
outcome of the buyout vote as uncertain.
It is unusual for companies to delay such a special meeting
of shareholders so close to the date but it is possible, said
Jesse Fried, professor of law at Harvard University.
"Usually there is a delay because the management wants to
lobby more shareholders," Fried said. "Doesn't usually mean the
terms of the deal are going to change."
But Dell's special board already has had many months to
convince shareholders. If the deal closes in October as
envisaged, shareholders will have received an additional 24
cents per share in dividends since the buyout was announced.
WAR OF WORDS
Dell's special committee has warned that the stock might
drop to anywhere between $8.67 and $5.85 if shareholders reject
the buyout, leaving them with a company in decline as consumers
continue to snub desktop and laptop computers in favor of
tablets and smartphones.
The war of words continued on Tuesday with Dell's special
board committee publishing a letter to the company's
shareholders reiterating its position that Icahn's proposal
would be too risky for them because it calls for saddling the
company with debt while leaving it public.
Icahn hit back by releasing consolidated statements of
income that he said showed how the company would still be viable
if his proposal was adopted. His partner Southeastern issued a
statement claiming Wall Street analysts who have been downbeat
on Dell have previously got their estimates on the valuation of
its peer Hewlett-Packard Co wrong.
Earlier on Tuesday, CNBC reported that BlackRock Inc
, which has a stake in Dell of more than 3 percent, was
likely to vote against the buyout. A BlackRock spokesman
declined to comment.
On Monday, T. Rowe Price Group Inc, which has a
roughly 4 percent stake in Dell, affirmed its opposition to the
buyout through a statement.
Many other shareholders, including Highfields Capital
Management, Pzena Investment Management and Yacktman Asset
Management, have also said they would vote against the offer
because they see it as too low.
Nevertheless, all three major shareholder advisory firms
have recommended Michael Dell's offer, potentially influencing
the decisions of a plethora of small mutual funds that typically
follow their lead.
Icahn has argued since March that Dell's founder is trying
to steal the eponymous company away from shareholders almost 30
years after he founded it with just $1,000.
Icahn and Southeastern announced their latest alternative
offer for Dell last week. It calls for a buyback of up to 1.1
billion shares at $14 apiece and a Dell warrant offered for
every four shares held.
Each warrant would entitle the holder to buy one Dell share
for $20 each within the next seven years.
Icahn estimates the value of his latest offer at $15.50 to
$18 per share. But for his proposal to be put forward for
consideration by Dell shareholders, he must first succeed in
having Michael Dell's offer voted down and then win enough
shareholder support to replace the members of Dell's board with
his own nominees.