Michael Dell and Silver Lake have offered improved terms for their proposed transaction to take venerable computer OEM Dell private. Their former offer was derailed by activist investor Carl Icahn, who offered an almost bizarre deal that involved removing nearly all Dell shares from the market, but not taking the company fully private.
Michael Dell and his partner Silver Lake were adamant that they were not willing to raise the price of their bid, even in the face of Icahn’s offer, which would have seen some shares purchased at a slight premium to their own proposed price.
They now have budged, but at the same time have given all but no ground. Their newly proposed terms contain a per-share purchase price increase of $0.10, a sum so miserly that it can only be construed as a middle finger to the Dell Special Committee of the Board. You wanted a price improvement? Here you go, bastards.
Here are the formal new terms, according to the Special Committee:
1. increase the merger consideration to $13.75 in cash per share of Company common stock, representing an increase in the consideration to be paid to unaffiliated stockholders of approximately $150 million; and
2. modify the “Unaffiliated Stockholder Approval” requirement in the merger agreement to provide that the voting requirement is the approval of a majority of the outstanding shares held by the unaffiliated stockholders that are present in person or by proxy and voting for or against approval of the merger agreement at the stockholder meeting.
The formerly offered price of $13.65 per share is giggling in a corner somewhere. Dell and Silver Lake call the above their “best and final proposal,” stating that they are “not willing to discuss” any improvement of the listed terms.
How can Michael Dell and his partner think that they can get away with such a pathetic sweetening of their former offer? Because what Icahn has in mind for Dell is complex and not in the best interest of the corporation. The firm needs time as a private entity so that it can rebuild its OEM business and focus on expanding its business services arm. It cannot do that with sufficient flexibility if it is chained to quarterly earnings reports.
The Special Committee has moved the vote to August 2, and states that it is “evaluating” the upgraded offer.
This saga is almost over. It’s been a surprisingly interesting journey, with competing bids cropping up even as Dell slowly sinks; the declining PC market in the face of rising competition from mobile devices has been a constant drag on Dell’s performance in recent quarters. However, following Dell’s first-quarter earnings report, investor interest in Dell has declined.
The company is down around a half percent in normal trading, at $12.82. That Dell is currently trading nearly $1 per share under the proposed offer price is indicative of a lack of investor confidence that the plan will succeed. And, given that the Icahn deal is priced higher per share than what Michael Dell currently proposes, investors aren’t viewing that plan optimistically, either.
It doesn’t seem likely that Icahn will further better his offer, or Michael Dell. Therefore, unless a new player appears — and that is exceptionally improbable — we have the final competing plans in hand. It’s up to the Special Committee and the company’s investors to choose a side.