Dell announced today that it has filed its initial proxy materials with the SEC in connection with a merger agreement between Dell, its Chairman and CEO Michael Dell and Silver Lake Partners. Under the terms of the deal, shareholders would received $13.65 in cash for each share of stock, which would be valued at about $24.4 billion.
In the rather lengthy filing, some of Dell’s biggest shareholders like activist billionaire Carl Icahn have urged the company to turn down the deal proposed by Dell and Silver Lake and allow shareholders to stay on as active investors, according to the New York Times.
The company has essentially been publicly shopping itself around to private-equity firms as part of its negotiated agreement with Silver Lake, during which it received “two non-binding alternative acquisition proposals,” including one from The Blackstone Group and one from investors affiliated with Icahn. Blackstone’s offer would allow portions of the computer maker to remain a publicly traded company, and Icahn (and JPMorgan’s supporting review) necessarily indicate that that this agreement would limit Dell’s financial flexibility and would not be the optimal road to take.
In its letter to shareholders, Dell said that it will continue to work with Silver Lake and Icahn towards what would constitute a more appealing offer for the company and its shareholders, but the letter basically signals that the company will look to move forward with its agreement to merge with Silver Lake. It has yet to see a better alternative.
The letter to shareholders from The Special Committee of Dell’s board of directors, which was included along with Dell’s filing today, is included below.
March 29, 2013
Dear Shareholders,Today, at the direction of the Special Committee of the Board of Directors of Dell Inc., the company filed with the United States Securities and Exchange Commission a preliminary proxy statement relating to the proposed acquisition of Dell by affiliates of Silver Lake Partners and Michael S. Dell.
Full Range of Alternatives Evaluated
When the Special Committee was formed last August, we set out to evaluate the full range of strategic and financial alternatives available to the company, including a potential going-private transaction. To assist us in this effort, we hired an experienced group of independent legal and financial advisors and, in addition, retained a top management consulting firm to help us evaluate the risks and opportunities in both the PC business and the company’s effort to transform itself into a more enterprise-centric business. That process, which included more than 25 Special Committee meetings over a period of approximately five and a half months, has highlighted to all of us the significant risks and uncertainties that the company faces as a stand-alone public company. As a result, we as a Committee believe strongly that a transaction that shifts to the buyer the risks associated with Dell’s business, at an acceptable valuation, would be beneficial for Dell’s shareholders.Silver Lake/Michael Dell Transaction Shifts Risks While Providing Attractive and Certain Cash Premium
The current Silver Lake and Michael Dell transaction delivers $13.65 per share in cash – a 37% premium to Dell’s 90-day average price and a 25% premium to the unaffected price prior to reports in the media about the proposed deal. We believe that this significant, immediate and certain premium offers superior value to owning Dell as a stand-alone entity today.As part of our agreement with Silver Lake and Michael Dell, we negotiated a robust “go shop” process, which included a 45-day period during which the Special Committee actively sought alternative acquisition proposals as well as a period thereafter in which interested parties can assemble and negotiate acquisition proposals. We are pleased to report that our process has generated two non-binding alternative acquisition proposals, one from a group affiliated with Blackstone Management Partners, L.L.C. (“Blackstone”) and the other from entities affiliated with Carl C. Icahn (“Icahn”). We intend to work diligently with both of them to assist them in their respective due diligence reviews of the company and to seek definitive proposals that would constitute a superior proposal to the current Silver Lake and Michael Dell transaction. Michael Dell has confirmed his willingness to explore participating in alternative acquisition proposals. However, there can be no assurance that either non-binding alternative acquisition proposal will ultimately lead to a superior proposal.
Seeking the Best Outcome for Dell Shareholders
Having conducted a thorough review of Dell’s challenges and opportunities, we remain convinced that the risks and uncertainties of a stand-alone public company are high. While we continue to recommend the current Silver Lake/Michael Dell transaction, and to work toward completion of that transaction, we will also work with Blackstone and Icahn to seek to develop a definitive alternative proposal that provides an even more compelling value proposition for Dell’s shareholders. Our goal was, and remains, to ensure that whatever transaction is consummated is the best possible outcome for Dell’s shareholders.We are pleased to be serving the Dell shareholders during this important process and we urge you to carefully consider the materials in the preliminary proxy statement.
Sincerely yours,
THE SPECIAL COMMITTEE OF THE
BOARD OF DIRECTORS OF DELL INC.