THE WALL STREET JOURNAL.
TECHNOLOGY | Updated August 2,
2013, 8:14 a.m. ET
Dell Deal Close but Not
Agreement With Founder,
Silver Lake Would Amend Voting Rules
DAVID BENOIT And
Dell and Silver Lake are nearing a new deal with Dell Inc.'s special
board committee that would increase 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
The per-share price would be
$13.75, up from an earlier $13.65, and the deal would also include a special
dividend for shareholders, the people said. The special dividend would be 13
cents a share for investors, and there would be a guarantee that the
regular, quarterly eight-cent dividend would be paid for the third quarter,
one person said.
The third-quarter dividend
wouldn't have been paid if the deal closed before late October; however, a
close would likely be later at this point, which had raised a question
whether the dividend would be paid.
In total, the new price bump and
one-time dividend would deliver at least $350 million more to stockholders
not affiliated with Mr. Dell, the person added. Adding the third-quarter
dividend would bring that figure to $470 million, the person said.
The new deal isn't done yet, the
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 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 would likely 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 that it
has gotten the best deal it could have out of the buyout group. The buyout
group would avoid putting up more equity for the deal, which matters in
calculating their future returns. Instead, they would be sacrificing money
from the company's cash pile that they had planned to have on hand for
operations and for paying down the debt they are about to pile onto it.
Dell shares were up 3.7% to
$13.44 in 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 company 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, have publicly said they
were 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 increase. The special committee countered with an offer to change
the "record date" for the same increase, the date that determines which Dell
stockholders could cast votes on the deal. The buyout group didn't think
changing the record date alone would ensure the deal's passage, a person
familiar with the buyout group said.
The newly revised deal also would
push forward the record date, creating a new base of shareholders to vote on
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, 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
Still, all of these favorable
factors weren't enough to overcome 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 if
the buyout vote failed, 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 in which the company would borrow money and pay
shareholders $14 a share for as many as 1.1 billion shares.
They have urged Dell's board to
call their proposal superior to Mr. Dell's and, short of that, to put both
to a vote to give shareholders an option to choose one, the other or
Write to David Benoit at
Sharon Terlep at email@example.com
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