The group trying to take Dell Inc. (DELL) private is pressing
the company to change how it counts shareholder votes to improve
the odds of their buyout winning approval, and has offered to
increase its bid by less than 1% as an incentive.
Michael Dell and private-equity firm Silver Lake have proposed
that abstentions, which currently count as "nos," instead don't
count at all in the tally on their buyout bid for the company.
Dell's special committee says it is evaluating the offer, which
calls for raising the bid by 10 cents to $13.75, as well as
changing the rules on the voting.
Dell postponed--for the second time--a shareholder vote that had
been scheduled for Wednesday on the previous $24.4 billion bid to
Aug. 2. The meeting was delayed last week after the buyout offer
didn't appear to garner enough shareholder support to succeed.
Dell shares were down 0.6% at $12.80 in early trading.
The new offer sets up a game of chicken between company and the
buyout group. While both have pressed to see the deal get done, the
special committee has wanted to see an ample price bump to win over
shareholders, while the buyout group had earlier messaged no bump
was forthcoming.
Now, the buyout group is offering a bit more money, but only in
exchange for a quick answer-- by 6 p.m. Wednesday--and the proposed
vote change designed to help secure passage.
Midmorning Wednesday, the buyout group said about 27% of
eligible Dell votes hadn't voted, a bit more than the 23% at which
people familiar with the matter pegged the figure last week, when
the vote was pulled.
"The will of the majority of the unaffiliated shares voting on
the transaction should not be thwarted by an unfair standard that
counts unaffiliated shares not voting as "no" votes," the group
said in a statement.
Meanwhile, a banker for working with the buyout group, Mark
Shafir, co-head of mergers and acquisitions at Citigroup Inc. (C),
said on CNBC that the $13.75 was the best and final offer but also
hinted that the 6 p.m. deadline for a response for the company
might not stick. He said the buyout group was "taking under
advisement" changing that deadline.
The board is motivated to complete a deal and avoid a proxy
fight to replace directors, which investor Carl Icahn has
threatened as he has criticized the buyout deal. But the board also
doesn't want to face ire from shareholders by changing the rules
along the way. And it isn't clear if the new 10 cent bump would win
over shareholders.
Dell's special committee put in place the current voting rules,
which also prohibit Mr. Dell's votes from being counted, as a way
to limit Mr. Dell's influence over voting on the buyout. He is
founder, chairman, CEO and Dell's largest shareholder.
Any changes to those rules are bound to be controversial, and
the special committee had worried that such moves could prompt
lawsuits from shareholders after the deal, people familiar with the
group's thinking have said.
Still, the buyout group has made clear it would only offer more
money if it were to see a change in voting rules that would make
the bid more likely to succeed, these people said.
Shareholders have been pressing the group to boost the offer,
which some have criticized as too chintzy since it was announced in
early February.
Richard Pzena, head of Pzena Investment Management LLC, the No.
20 shareholder in Dell as of the most recent data available,
criticized the revised offer Wednesday and the board's handling of
the situation.
"I can't believe 10 cents is worth changing the terms," Mr.
Pzena said Wednesday. "Obviously [Mr. Dell] can't win so he is
trying to change the rules."
Under the buyout agreement with the company, the 16% stake held
by Mr. Dell and his affiliates can't vote, meaning the buyout group
needs at least 42% of outstanding shareholders to vote in the
affirmative.
The buyout group on Wednesday called the new offer its "best and
final"-- language it hadn't used earlier.
"This is our best and final proposal," said a letter the group
wrote to Dell's special committee. "There is simply no rational
basis for shares that are not voted to count as votes against the
merger agreement for purposes of the unaffiliated stockholder
vote."
Mr. Icahn, Dell's second-largest shareholder behind Mr. Dell,
has repeatedly criticized the bid, saying the proposal undervalues
Dell's shares.
A representative for Mr. Icahn wasn't immediately available for
comment.
--David Benoit contributed to this article
Write to Sharon Terlep at sharon.terlep@wsj.com
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