This Sweetened Offer Finally Elicits a Yes From Dell


Michael Dell and financial backer Silver Lake Partners might have heard that the higher buyout price of $13.75, which was proposed in return for a change in voting rules, appealed to some of Dell’s largest shareholders who have abstained from voting on the $24.4 billion proposal to take Dell (NASDAQ:DELL) private thus far. The special committee of the company’s board of directors announced Friday that it entered into a “revised definitive merger agreement” with the buyout group.

Sources familiar with the buyout proceedings told Reuters on Thursday that important shareholders, whose votes could swing the deal either way, said they would back the go-private deal at the sweetened price of $13.75, just a dime more than the original offer.

However, the buyout group — led by the personal computer manufacturer’s founder and chief executive, Michael Dell — said it would only make the offer if rules were changed so that shareholders who abstained from voting would not be counted as votes against the deal as outlined in the original agreement. Michael Dell said that standard would unfairly “skew the playing field” because “the will of the majority may be defeated by the shares that do not vote.”

The special committee said no to that modification.

But an amended proposal did elicit a yes from the committee. The proposal now before Dell shareholders raised the purchase price to $13.75 per share from $13.65 and added a special dividend of 13 cents per share and a third quarter dividend of 8 cents per share, both of which will be paid at or before the deal is closed.

The revised agreement increased the value of the deal by at least $350 million excluding the third quarter dividend. When the additional 8 cents per share divided is included, the value of the deal increases by $120 million.

While it came at a slightly steeper price, Michael Dell will get the rule change he desired. In return for the increased offer, investors holding the shares as of August 13 can vote and abstentions will no longer count as no votes, two changes that will likely make it easier for Michael Dell to get his version of the buyout approved. The record date was previously set for June 13, meaning that shareholders who acquired their stakes after that day could not vote.

Of course, the date of the shareholder vote has been pushed back once again, to September 12. Already, the vote has been postponed twice thanks to what Michael Dell has called lower-than-expected voter turnout.

“We believe modifying the voting standard is in the best interests of Dell shareholders, both because it has enabled us to secure substantial additional value and because it provides a level playing field for the decision facing shareholders,” Alex Mandl, the chairman of Dell’s Special Committee overseeing the deal, said in a press release. “The original voting standard was set at a time when the decision before the shareholders was between a going-private transaction and a continuation of the status quo.”

Shares rose as much as 5.31 percent, to $13.64, after the revised agreement was made public. Dell shares have been trading below the original $13.65 offer price since April, a sign that investors were not confident the go-private proposal would be accepted, and the stock still remains below that price.

Shareholders Carl Icahn and Southeastern Asset Management have made a series of alternative proposals to challenge Michael Dell’s offer, and on Thursday, they launched a lawsuit against Dell to prevent the company and its board from altering terms of the scheduled vote on a proposed $24.4 billion takeover.

Follow Meghan on Twitter @MFoley_WSCS

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