At the last minute, Dell delays shareholder vote to go private
Dell has delayed a shareholder vote of a proposed buyout deal in which founder Michael Dell and Silver Lake Partners would take the company private.
Dell on Thursday said it adjourned a shareholder meeting to "provide additional time to solicit proxies from Dell stockholders," and that a special meeting will reconvene on July 24 at 5 p.m. CDT at the company's campus in Round Rock, Texas.
Michael Dell and Silver Lake in February proposed a deal to buyout Dell for $24.4 billion, or $13.65 per share. The deal includes a $2 billion loan from Microsoft, and debt financing from Bank of America, RBC Capital Markets, Merrill Lynch and Barclays. Dell's board backed the deal, saying it was the best offer on the table.
But some shareholders came out against proposed deal, believing the company was being undervalued. Some advisory firms recommended shareholders vote for the deal in the wake of a weakening PC market and Dell's uncertain future. Dell's business is largely centered around the deteriorating PC business and the company has little to no presence in the growing smartphone and tablet markets.
The delay also prolongs a takeover battle waged by major shareholders Carl Icahn and Southeastern Asset Management, who were against the deal and have made alternative buyout proposals for the company. Icahn has said that latest offer is potentially worth $15.50 to $18 a share for current shareholders.
Delays are not unusual in such deals where shareholders may need time to reconsider options or place a vote, said David Frink, a Dell spokesman.
If the Michael Dell/Silver Lake offer is approved by shareholders, Dell may have to wait on the response from Icahn and Southeastern Asset Management, said Jason Schloetzer, assistant professor of accounting at Georgetown University's McDonough School of Business.
"This camp will certainly respond and are basically looking for an increase in the initial offer price. Unless this camp is willing to hold Dell for the long-term and take on the risk associated with implementing the proposed change in strategic direction, then I see their move as purely an effort to up the initial offer price," Schloetzer said.
If the Michael Dell/Silver Lake offer deal is not approved by shareholders, the next step could be to wait on the response from that camp.
"Because the Special Committee has already asked Michael Dell/Silver Lake to raise its initial bid, it seems likely that should shareholders reject the buyout proposal, the offer price would be raised. It's unlikely that the buyout proposal would simply be abandoned this early in the process," Schloetzer said.
Icahn and affiliated parties also likely have recourse in the courts by arguing the board has accepted an offer that is not in the best interest of shareholders.
"This legal process could take some time to play out," Schloetzer said.
Perhaps the best way for the Michael Dell/Silver Lake offer to be approved would be for Michael Dell to find a way to appease Icahn without requiring court involvement or another shareholder vote, Schloetzer said.