Battle for Dell yet to power down
When a takeover deal was announced in February, Dell looked set to be handed over to its founder, but billionaire Carl Icahn remains resolute in his opposition
The founder of Dell sought this week to negotiate a surer path to victory for his takeover effort, offering a small increase in price in exchange for a more certain shareholder vote.
But it was not clear that the new bid by Michael Dell, the founder, would succeed, with a special committee of the company’s board hoping to squeeze a few more cents a share out of him.
In a letter to the committee that was disclosed on Wednesday, Dell and his partner, the investment firm Silver Lake, offered to raise their per-share offer a modest 10 cents, to $13.75 (€10.40), for a total value of $24.6 billion. In return, the two demanded that Dell must drop a rule that shares not cast either for or against the deal be counted as No votes.
Such a move would help the takeover bid succeed against a bruising challenge from recalcitrant shareholders, led by the billionaire Carl Icahn. Because Michael Dell’s 16 per cent stake cannot be counted in the vote, he and Silver Lake must win over more than 42 per cent of the company’s shares. Icahn and his main partner, Southeastern Asset Management, together own more than 12.5 per cent of the company’s shares, posing a formidable bloc of opposition.
The special committee did not indicate which way it would lean, but a person close to the committee, who spoke anonymously because the matter was confidential, said it hoped to see an offer of at least $14 a share before it agreed to changes in the voting procedure. In a statement, the committee said it had rescheduled a vote on the deal to August 2nd, the second time it moved the vote.
While Dell and Silver Lake had demanded that the special committee act by 6pm on Wednesday, they extended their offer to August 2nd.
Behind the move by Dell and Silver Lake is a desire to remove what they believe is a huge impediment to acceptance of their deal, according to people briefed on the matter. An unusually high number of shares – about 27 per cent – abstained from a recent preliminary tally.
Some of those shares are held by foreign investors, such as the Government of Singapore Investment Corporation, which tend not to vote in shareholder matters. Others are held in brokerage accounts where the ultimate owners are hard to determine.
Still more were held by shareholders as of June 3rd, the record date for the vote, but have since been sold. That means some investors of record no longer hold the shares and have no economic reason to vote in the deal.
Certainly, some shareholders who have abstained may have done so out of opposition to the takeover bid.
“Particularly given the efforts of others to promote alternative transactions, and the ability of those parties to vote their shares when my shares do not count, it makes no sense whatsoever to skew the playing field even further by counting shares not voting as if they supported the opposition group,” Michael Dell said in an open letter to shareholders that was issued on Wednesday evening.