Michael Dell and Silver Lake are nearing a new deal with Dell
Inc.'s (DELL) special board committee that would bump the price
they would pay for the computer maker in exchange for a
modification to the voting rules expected to ease passage of the
deal, according to people familiar with the discussions.
The per-share price would be $13.75, up from an earlier $13.65,
and the deal also would include a special dividend for
shareholders, one of the people said.
The new deal isn't done yet, the people cautioned.
Any new pact would delay the process for a vote by Dell
shareholders likely by about another month. After two earlier
delays, the vote had been set for this Friday morning.
The voting-rule change would have only shares that are actually
voted count, altering an earlier clause that had abstentions
counting as "no" votes. That clause proved problematic when turnout
for the vote wasn't as high as the buyout group and special
committee had hoped; that led to the earlier vote delays.
The adjustment could be enough to get the deal to pass,
advocates and detractors of the deal have said.
The change likely would prove controversial among some
shareholders. Carl Icahn sued the company Thursday to stop any such
voting change.
A special dividend could help both the special committee and the
buyout group get around certain concerns.
It would put more money in the hands of shareholders, which
would help the special committee argue it has gotten the best deal
it could out of the buyout group. For the buyout group, it would
avoid putting up more equity for the deal, which matters in
calculating its future returns. Instead, the group would be
sacrificing money from the company's cash pile it had planned to
have on hand for operations and paying down the debt it is about to
pile onto it.
Dell shares were up 3.7% to $13.44 in recent premarket
trading.
Mr. Dell and Silver Lake are seeking to take private ownership
of the Round Rock, Texas, computer maker he founded nearly 30 years
ago and that has struggled to keep pace with the latest technology
trends. Mr. Dell has envisioned focusing the company on serving
corporate clients rather than selling consumer computers.
Shareholders who have protested the deal have had many of the same
goals but felt the original $13.65-a-share price undervalued the
stock and that the buyout unfairly cut them out of potential upside
in any Dell revival.
The resistance to the original deal, struck Feb. 5, proved more
than Mr. Dell could overcome, leading the company to repeatedly
delay a shareholder vote until it could work out an arrangement
that paved the way for the deal's success.
When more than 20% of shares weren't voted, the buyout faced a
likely defeat, as another 22% of shareholders eligible to vote,
including Mr. Icahn, publicly have said they are rejecting the
deal.
Mr. Dell, the founder, chairman and chief executive of the
company, and Silver Lake had earlier asked the special committee to
change the rules governing abstentions in exchange for a 10-cent
bump. The special committee countered with an offer to change the
"record date" for the same bump, the date in time that determines
which Dell stockholders can cast votes on the deal. The buyout
group didn't think changing the record date alone would ensure the
deal passing, a person familiar with the buyout group had said.
A new pact would be the latest twist in the takeover drama, in
which Mr. Dell's goal of taking the company out of the public eye
has proven elusive, even as certain key developments have gone his
way.
In April, industry research firm IDC issued a surprisingly bleak
report on global PC shipments, potentially lending credence to the
board's inclination to sell the company.
Later that month, private-equity giant Blackstone Group LP (BX),
which had considered an offer greater than $14.25 a share, backed
away after getting spooked at Dell's business prospects during
due-diligence research. That move, and the lack of any other
bidders for the whole company, gave the committee and buyout group
leverage to say no higher offer was in sight.
Then, in July, three shareholder advisory firms urged
shareholders to take the $13.65-a-share offer.
Still, all of these favorable factors weren't enough to overcome
the acerbic resistance posed by Southeastern Asset Management Inc.
and its friend in the fight, Mr. Icahn, who together maintained the
price was too cheap and the deal cut public investors out of any
upside the company could achieve in the future under private
ownership.
The investing pair have said that if the buyout vote fails, they
would put up their own slate of directors at Dell's annual meeting
to try to oust the board, including Mr. Dell. They have proposed a
plan where the company would borrow money and pay shareholders $14
a share for up to 1.1 billion shares.
They have urged Dell's board to call their proposal superior to
Mr. Dell's and, short of that, put both to a vote to give
shareholders an option to choose one, the other or neither.
Write to David Benoit at david.benoit@wsj.com and Sharon Terlep
at sharon.terlep@wsj.com
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