--Institutional Shareholder Services recommends Dell
stockholders approve taking company private
--ISS recommendation improves odds deal will be approved at July
18 vote
--ISS strongly criticizes Carl Icahn's proposal
A leading shareholder-advisory firm said Dell Inc. (DELL)
stockholders should vote for a $24.4 billion effort to take the
computer-maker private, a decision that may seal the controversial
buyout by founder Michael Dell.
The recommendation from Institutional Shareholder Services Inc.,
which advises investors how to vote on corporate issues, improves
the odds of the buyout winning approval from Dell stockholders in a
vote slated for July 18.
The ISS recommendation may take the wind out of critics who say
the deal is unfair, and it eases the pressure on Mr. Dell to
bankroll a higher price to win over skeptics.
ISS said the transaction "offers a 25.5% premium to the
unaffected share price, provides certainty of value, and transfers
the risk of the deteriorating PC business and the company's ongoing
business transformation to the buyout group."
In making the recommendation, ISS agreed with the buyout group's
arguments that taking Dell private would make the transformation
faster, and therefore more likely to succeed.
"A business transformation in this industry, which is continuing
to transform itself, will likely have a moving target, speed of
transformation is especially crucial for success," the report
said.
The proxy advisory firm also strongly criticized a proposal from
influential Wall Street investor and Dell stockholder Carl Icahn,
which envisioned borrowing money to pay out shareholders rather
than use such funds for a buyout. The report said "the undeniable
risk of the leveraged recapitalization proposal, however, is that
shareholders cannot actually elect it in lieu of the proposed
go-private transaction."
The special board committee negotiating the deal for Dell said
in a statement it was pleased with the recommendation.
The ISS report comes after investors on Friday sent shares of
Dell down to $13.03, their lowest since the buyout offer was
announced in February and a price that could help make the $13.65
offer look appealing.
Dell shares were at $13.39 in premarket trade.
People familiar with the buyout group's thinking have considered
the ISS report pivotal in potentially swaying a close vote one way
or the other.
The report marks the latest plot point in one of the most
dramatic deal situations of the year, one that has seen investors
from Mr. Icahn to Blackstone Group LP (BX) sizing up the worth of
the Round Rock, Texas, company.
In a somewhat ironic twist, both the special committee of Dell's
board that negotiated the deal and Mr. Dell himself have argued
against the company's prospects as a public entity in an effort to
convince shareholders the pending offer is worth taking.
Mr. Dell, the company's founder, chairman and chief executive,
and private-equity firm Silver Lake Partners struck an agreement in
February to buy Dell's publicly held shares for $13.65 each.
The per share offer is about a 25% premium to where the stock
was trading before news broke that Mr. Dell was talking with
private-equity investors about a buyout.
Mr. Icahn and some other Dell stockholders early on bashed the
deal, saying Mr. Dell is unfairly taking advantage of a low point
in his company's fortunes to buy his company too cheaply and
cutting public shareholders out of any turnaround. Mr. Dell has
said his company is ailing and needs to craft a turnaround free
from the scrutiny of public shareholders.
Many big investment firms make their own decisions on how to
vote on corporate deals, and are unlikely to be swayed by proxy
advisers. Some investment funds do rely heavily on the
recommendations of the advisers.
Still, corporate ballots sometimes go against the
recommendations of proxy firms. In 2011, ISS recommended
shareholders reject a sale of J. Crew Group Inc. to a group that
included the company's CEO. Shareholders overwhelmingly voted for
the deal. ISS urged investors to approve a 2010 takeover of energy
company Dynegy Inc. (DYN), and shareholders voted the deal down.
This year, shareholders overwhelmingly rejected a proposal to strip
J.P. Morgan Chase & Co. (JPM) CEO Jamie Dimon of his chairman
role, even though ISS had endorsed the proposal.
David Benoit and Joann S. Lublin contributed to this
article.
Write to Shira Ovide at shira.ovide@wsj.com
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