Ahead of the Bell: Dell seeks deal approval again

Dell to reconvene shareholders in 2nd attempt to win approval of $24.4B deal with Michael Dell

Associated Press

ROUND ROCK, Texas (AP) -- Dell's board of directors is hoping that its additional arm-twisting efforts have swayed enough shareholders to support the slumping personal computer maker's proposed $24.4 billion sale to a group led by CEO Michael Dell and buyout firm Silver Lake Partners.

The directors' power of persuasion will be tested Wednesday evening when Dell shareholders reconvene for a special meeting to vote on the deal reached with Michael Dell and Silver Lake in February. The meeting is scheduled to begin at 5 p.m. CDT.

It will be the second time in less than a week that the shareholders have been summoned to the company's Round Rock, Texas, headquarters to cast their ballots. The first meeting occurred last week, but the special board committee in charge of the sale promptly postponed the scheduled vote in a sign of the persisting doubts about the deal with Michael Dell, despite five months of campaigning.

The proposed sale needs the backing of just over 42 percent of Dell's outstanding stock to be approved. Less than 50 percent of the stock is required because Michael Dell's 15.6 percent stake in the company isn't counted in the balloting. Delaying the election gave the board and Michael Dell more time to convince stockholders to accept $13.65 per share to sell their holdings in the company.

The price is more than 40 percent below where the stock stood in 2007 when Michael Dell returned for his second stint as CEO of the company that he founded as a teenager nearly 30 years ago. In recent years, though, Dell's fortunes have drooped as the rising popularity of smartphones and tablet computers have caused PCs to fallen out of favor.

Two major Dell shareholders, billionaire Carl Icahn and investment firm Southeastern Asset Management, have been spearheading the drive to defeat the deal with Michael Dell. They depict the proposal as an attempt by Michael Dell to seize control of the company at a sharp discount to its long-term value. Icahn and Southeastern have offered a more complicated alternative, but they first need to block the deal with Michael Dell and then replace the company's board in a follow-up battle.

Dell's board has a good inkling how the balloting is going because most votes are submitted electronically ahead of the meeting. That leaves open the possibility that the vote could be delayed once again Wednesday evening.

In a letter on Tuesday, Icahn and Southeastern ridiculed the four-member special committee for its stalling tactics. "Do not move election day again," they wrote. "This is not a banana republic."

Michael Dell believes he can turn around the company by spending heavily to build better tablets while also diversifying into more profitable areas of technology, such as business software, data storage and consulting. But making those changes are likely to be tumultuous and temporarily lower Dell's earnings, an upheaval that Michael Dell contends will be more tolerable if the company no longer has to answer to other shareholders. If Michael Dell's deal closes, the company would become privately held.

Dell's board says it want to sell at $13.65 per share because it believes waiting for an uncertain turnaround is too risky. If the current deal unravels, analysts believe Dell's stock could plunge below $9, reverting back to its levels of late last year.

The company's stock fell 14 cents Tuesday to close at $12.88.

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