Dell Inc.’s (DELL) special committee of the board is considering delaying the July 18 shareholder vote on the buyout by founder Michael Dell, seeking a higher bid or time to win support for the $24.4 billion deal, said a person with direct knowledge of the situation.
The committee is exploring a postponement of about a week, said the person, who asked not to be named because the process is private. The group is likely to make a decision by the morning of July 18 if the votes already cast against the buyout are enough to scuttle it, the person said. The June 3 record date, by which one had to invest to be entitled to vote, won’t change, said the person.
Adjourning the vote would give buyers Dell and Silver Lake Management LLC time to boost the bid or declare the current offer of $13.65 a share as best and final, said the person. It would also give shareholders, who can recast their votes up until the last minute, a chance to change their minds, according to the person.
“If they’ve talked to enough shareholders and they’re not confident that the deal would pass, they could potentially sweeten the deal from $13.65, but they would need time to make that decision,” said Jeff Fidacaro, an analyst at Monness Crespi Hardt & Co. in New York.
Dell and Silver Lake consider the bid of $13.65 to be best and final because it represents a significant premium, considering that the cost of borrowing has risen and Dell’s earnings have shrunk since the deal’s announcement, said people familiar with the situation.
The move also would prolong Dell’s struggle for control against billionaire investor Carl Icahn, who has pushed for months for the founder to raise his bid. BlackRock Inc. (BLK), which has a 4.4 percent stake in the third-largest personal-computer maker, voted against the buyout, according to the person.
David Frink, a spokesman for Round Rock, Texas-based Dell, declined to comment. Lauren Post, a spokeswoman for BlackRock, declined to comment, as did a representative for Silver Lake. An assistant for Icahn said he wasn’t available to comment.
T. Rowe Price Group Inc., which holds 4.1 percent, reiterated its opposition yesterday, saying the buyout doesn’t “reflect the value of Dell.” To succeed, the buyout needs to win approval from a majority of holders excluding Michael Dell, who has about a 16 percent stake.
Investors opposed to the transaction own more than 20 percent of Dell shares, according to a report last week from shareholder adviser Glass Lewis & Co., which is backing Dell’s bid with Silver Lake. Opponents may also include Harris Associates LP, Yacktman Asset Management Co. and Pzena Investment Management Inc. (PZN), according to the report. Southeastern Asset Management Inc., another of Dell’s top outside holders, today reiterated its opposition to the buyout.
The special committee reiterated its support for the Silver Lake-Dell offer in a statement today.
Dell shares fell 1 percent to $13.02 as of 4:30 p.m. in New York.
Icahn, now Dell’s top outside holder with an 8.7 percent stake, has made at least four attempts to derail the buyout. In his latest effort last week, he pledged to sweeten his offer to acquire about 1.1 billion Dell shares at $14 each by adding warrants that investors could exchange for additional shares. The latest proposal’s value to shareholders would be about $15.50 to $18 a share, Icahn said last week.
“We do not believe that Mr. Icahn’s proposal is superior to the certainty of value offered by a sale of the entire company at $13.65 per share,” the special committee said. “A sale at a premium remains a superior option to a leveraged recapitalization.”
Competing for Cloud
Icahn previously said he was preparing to exercise appraisal rights in court, and urged fellow shareholders to do the same. Dell holders who don’t vote in favor of the deal would be eligible to exercise those rights under the General Corporation Law of Delaware. They would be entitled to receive a cash payment equaling the “judicially determined” fair value of their Dell shares, a process that could leave them with more or less than the $13.65 offer price.
Michael Dell is attempting to take his company private, almost three decades after he founded it, to help transform the PC maker into a contender in tablets and cloud computing. His proposal won key endorsements last week from Institutional Shareholder Services Inc. as well as Glass Lewis.
Dell may need years to effect a turnaround if the Michael Dell-Silver Lake and Icahn deals don’t come to fruition, and the stock could fall to below $9, said Jayson Noland, an analyst at Robert W. Baird & Co. in San Francisco.
“There’s substantial downside if these deals were to go away,” Noland said. “The stock could go to 8-something or even lower. The PC market is bad and Dell is heavily exposed -- same story.”
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