Dell still eager for battle to remake the company that bears his name
One-time PC kingpin latest to try to refocus business to make up for past mis-steps in face of decline in demand for PCs
Dell CEO Michael Dell: wants to take PC maker private
“We are pleased to have won another battle in the Dell war but the war itself is far from over. More to follow.”
That cautiously optimistic tweet last Friday from Dell Computer founder Michael Dell signalled a major strategic gain in an ongoing buyout campaign for the man who famously launched one of the world’s largest computer makers from his college dormitory room.
Shareholders had been due to vote that day on Dell’s latest attempt in recent months to buy back the firm he founded three decades ago, and were expected to reject it. But last-minute negotiations and a fresh offer from Dell and his co-bidder, private equity firm Silver Lake Partners, saw the board agree to move the vote to September 12th. Critically, the board also agreed to change shareholder-voting procedures so that abstentions are no longer counted as “no” votes. Many analysts believe that gives Michael Dell a good chance of victory.
The new deal-sweetener put forward by Dell in his $24 billion (€18 billion) buyout offer would increase the basic bid by 10 US cents to $13.75 a share, and also add a 13 cent per share special dividend. An add-on likely to please many shareholders is an agreement to pay a third-quarter dividend of eight cents as well. Overall, the new bid would raise Dell’s offer by at least $350 million, possibly up to $470 million.
As chairman and chief executive, Dell still runs the company, but he’s been under serious threat for some time by billionaire activist investor Carl Icahn, who owns a significant portion of Dell shares (8.9 per cent after additional share purchases last week, compared to Dell’s holding of 15.7 per cent).
The 77-year-old Icahn, best-known for his acquisition of the ailing airliner TWA, which was subsequently asset-stripped, leads a vocal, rebel shareholder faction which opposes Dell’s ongoing attempts to buy back his company and take it private.
Icahn, who says Dell’s offers have repeatedly undervalued the company, has made acerbic tweets on the situation, such as the recent: “All would be swell at Dell if Michael and the board bid farewell.” He wants to remove Dell and the entire board, but hasn’t offered much detail on what direction the company should take after that.
For his part, Dell says he wants to move the PC maker away from the volatility of manufacturing, towards a new focus as a services company for corporate clients. He argues the company needs to go private to give it time to restructure, away from quarterly financial reporting pressures to Wall Street and shareholders.
He certainly has the deep pockets – a $15 billion fortune – to try and wrest back the company that bears his name. According to regulatory filings, before his new offer, Dell had already promised $4.5 billion in cash and stock towards the purchase, with the remainder of the tab covered by Silver Lake.
It’s all a far cry from the days when Dell was king of the PC. The fast growth of the internet drove demand for home PCs, and then laptops.