Law360, New York (September 18, 2013, 6:14 PM
ET) -- The official tally from
Dell Inc.'s $25 billion buyout vote is in, with two main
takeaways: Resetting the record date is a remarkably effective
way to cut out abstentions, and Dell's appraisal action may end
up being one for the history books.
Excluding CEO Michael Dell's 15 percent stake, about 734 million shares, or 62.6 percent of all ballots cast, voted in favor of the deal. Another 400 million, about 34 percent, voted against. The remaining 39 million, or 3.3 percent, abstained.
The vote, held Sept. 12 at the company's headquarters in Round Rock, Texas, paves the way for Michael Dell and private equity firm Silver Lake Partners to take the teetering technology giant private for $13.88 per share.
All that remains now is to line up the $13.75 billion in bank and bond debt, the first pieces of which kicked off their road show this week.
Takeaway 1: Record Date Reset Works Wonders
At Dell's first merger meeting, in mid-July, nearly one quarter of shares weren't voted at all. The abstentions were likely a mix of apathy and "soft no" votes — a way for institutional shareholders to express displeasure with the deal without making enemies — and threatened to derail the deal, which required a majority of all of Dell's outstanding shares to vote in favor, rather than simply a majority of votes cast.
The buyers won a change to the voting rules to only count cast ballots. But even under the old rules, with abstentions counted as "no" votes, the buyout still would have succeeded.
It was the decision to reset the record date — part of the last-minute changes that also included a 10-cent-per-share price bump and special dividend — that made the difference. Furious trading during June and early July meant that stockholders entitled to vote under the original June 3 record date weren't necessarily the same ones holding shares by September.
Changing the record date brought in latecomers who would be more likely to care one way or the other about the outcome.
And it got the stamp of approval from Delaware Chancellor Leo E. Strine Jr., who ruled last month that boards can take extraordinary measures, including resetting record dates, in support of a deal they think is in shareholders' best interests. The decision, which effectively killed organized opposition from dissident investors Carl Icahn and Southeastern Asset Management Inc., drew on years of Delaware precedent that has given boards a lot of latitude in the trenches of contested M&A battles.
Takeaway 2: Sizable Appraisal Pool
In buyouts, disgruntled stockholders who want a judge to decide how much their shares are worth must do two things: vote against the deal and send a letter to the company declaring their intention to seek appraisal.
Although Dell has not yet said how many demand letters it has received, and a spokesman declined to comment Wednesday, the final tally shows that more than one-third of shareholders voted no, which makes them theoretically eligible.
The Dell appraisal is likely to be the largest ever, and certainly one of the highest-profile. Assuming Icahn and Southeastern voted their roughly 225 million combined shares against the transaction, that leaves 175 million other shares held by investors who think they can do better in court.
That effort will kick off later this fall, once the statutory 120-day window after the vote has closed. Icahn is expected to vie for lead plaintiff status against the Dell Valuation Trust, a novel effort to make appraisal rights liquid and tradable. The trust is organized by The Shareholders Forum, a loose affiliation of institutional investors, headed by former investment banker Gary Lutin and advised by Fish & Richardson PC and Bingham McCutchen LLP.
Dell's special committee is represented by Debevoise & Plimpton LLP partners Jeffrey Rosen, William Regner and Michael Diz, and attorneys from Morris Nichols Arsht & Tunnell LLP. JPMorgan Chase & Co. and Evercore Partners Inc. are providing financial advice.
Michael Dell is represented by Martin Lipton and Steven A. Rosenblum of Wachtell Lipton Rosen & Katz. Silver Lake is represented by Rich Capelouto and Chad Skinner of Simpson Thacher & Bartlett LLP.
Icahn is represented by in-house counsel. Southeastern is represented by Dennis J. Block of Greenberg Traurig LLP.
--Editing by Jeremy Barker.