Dell Shareholders Back Michael Dell's Takeover Offer

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Dell CEO Michael Dell shareholders back Dell takeover bid
Kimihiro Hoshino, AFP/Getty Images

By TOM MURPHY

The board at Dell said that a takeover bid led by the company's founder and CEO is in the best interest of the slumping PC maker's shareholders and asked them to approve the deal when it's put to a vote in July.

The Round Rock, Texas, company's announcement Friday amounts to the latest volley in a battle with prominent shareholders over the company's future and Michael Dell's role in it.

Dell directors unanimously recommended an offer from Michael Dell and the investment firm Silver Lake Partners to take the company private for $24.4 billion, or $13.65 a share, according to filings with the Securities and Exchange Commission.


A board special committee told shareholders in an open letter Friday that Michael Dell's option was the best alternative, and that it offered certainty and "a very material premium" in a challenging business environment. It noted that the $13.65 a share price represented a premium of about 37 percent over the stock's average closing price in the months before rumors about a potential deal surfaced.

But billionaire investor Carl Icahn and others have complained that the price was too low. Icahn and Southeastern Asset Management, Dell's largest independent shareholder, pitched an alternative this month that would let Dell shareholders keep their stake in the company and give them either $12 a share in cash or additional shares.

The committee has said that it needs more information on that deal.

It also said Friday that shareholders would retain substantial risks if the company took on debt to afford a special payout, a process known as "leveraged recapitalization." With the buyout, the risk shifts to the parties buying the company.

Icahn and Southeastern own more than 12 percent of Dell shares combined, a total that trails only Michael Dell. They have said they will work to convince other Dell shareholders to reject the Michael Dell buyout. Icahn also has said Michael Dell would no longer be running the company if his proposal won out.

Icahn has nominated himself and 11 other candidates for spots on Dell's board. But the company hasn't scheduled an annual meeting at which it will elect directors. The board said Friday it may not do that if shareholders vote for the buyout at the July 18 special meeting, which will be held at the company's headquarters in Round Rock.

Neither Icahn nor Southeastern immediately returned calls from The Associated Press Friday morning.

The special committee formed last August after Michael Dell told the board he was considering a plan to take the company private. It said it negotiated six price increases with Michael Dell, who made the buyout offer with the investment firm Silver Lake Partners. The committee said it also contacted 21 strategic and 52 financial buyers, but a superior offer didn't materialize.

Dell Inc. (DELL) and other personal computer makers have seen sales crumble because of the growing popularity of smartphones and tablets. Michael Dell believes he can turn the company around by taking it private and diversifying into niches, such as business software, data storage and consulting.

Dell said earlier this month that its earning sank in its latest quarter to $130 million, or 7 cents a share, compared to $635 million, or 36 cents a share last year. Revenue also fell 2 percent to $14.1 billion.

Shares of Dell climbed 6 cents to $13.34 Friday morning while broader trading indexes fell slightly. The shares have already climbed more than 31 percent so far this year.


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