Dell delays vote on buyout
- Carl Icahn and his partners say bid undervalues Dell and urge shareholders to wait
- Michael Dell and partners want to take company private for %2424.4 billion%2C %2413.65 a share
- Shareholder vote July 24 could decide whether PC maker goes private or stays publicly traded
Dell has delayed Thursday's vote on founder Michael Dell's plan to take the slumping computer maker private in a sign the board needs more time to rally support. Shares of Dell are up more than 2.4%.
The vote was scheduled at a special shareholders meeting at the company's headquarters in Round Rock, Texas. Dell called the meeting to order, then quickly adjourned it without a formal vote. It was rescheduled for July 24.
In a statement released after the meeting was abruptly adjoined, Dell says the vote has been delayed "to provide additional time to solicit proxies from Dell stockholders."
The postponement is a significant setback for Michael Dell and the company's board, which has spent the past five months trying to persuade shareholders to approve the buyout proposal.
CEO Dell and Silver Lake Partners investing partners are offering to take the company private for $13.65 per share, or $24.4 billion. But so far, billionaire investor Carl Icahn, a vocal critic of the offer, has refused to drop his counteroffer.
On Monday, brokerage and shareholder T. Rowe Price voiced its opposition to Michael Dell's offer. At the urging of Icahn, some shareholders are grousing that the offer undervalues Dell, hinting that they might balk at the vote in hopes of getting CEO Dell and his group to sweeten the bid.
Icahn and Southeastern Asset Management partners have offered $14 a share in cash plus one warrant for every four shares tendered. The warrant would give shareholders the right to buy one Dell share for $20 in the next seven years. In a letter to shareholders, Icahn valued his counteroffer at about $15.50 to $18 a share. Both offers would add substantial debt to Dell's balance sheet and require loans from private-equity firms or major customers.
On Tuesday, a special committee of Dell's board tasked with evaluating the offers declined to endorse Icahn's latest proposal as superior. The committee does not accept Icahn's financing terms, which are conditioned on replacing Dell's board with Icahn and 11 others who work for Icahn and Southeastern.
"We wish to note that it is unfortunate Mr. Icahn continues to conduct his campaign by trying to discredit the special committee and accuse it of frightening Dell stockholders," the committee said Tuesday in a statement.
Icahn and his partners own a 13% stake in Dell. Under the terms of the Dell offer, the founder cannot use his shares — a 16% stake — in the shareholder vote. That means he and his partners need 42% of shareholders to approve their offer.
Struggling PC maker Dell, based in Round Rock, Texas, has fallen victim to shrinking PC sales globally and failed to ride the mobile computing wave of the past few years.
Founder Dell says his proposal to take the company private would give it time away from meeting investor demands for short-term profit and allow for a dramatic overhaul aimed at developing data centers, services and software in a bid for higher margins.
However, "there hasn't been a compelling case that the current business strategy is wrong and an alternative is superior," said Jay Ritter, a professor of finance at the University of Florida, of the contentious proposals.
Last week, proxy advice firm Institutional Shareholder Services and two other major firms in that industry endorsed the buyout offer from Dell, who founded the company in 1984, and Silver Lake.
Founder and CEO Dell owns about 16% of the company's shares. Under the deal, he would relinquish his publicly traded shares and throw in $750 million in cash (of his $16 billion fortune) to contribute about $4.5 billion to the offer.
"A bidding war would result in a much higher price," says Ritter.
Contributing: The Associated Press