Industryweek 4822 Dellmichael

Dell Postpones Vote on Go-Private Plan

July 18, 2013
"The reason it was postponed was they didn't have the votes," said technology analyst Rob Enderle. "That may motivate them to sweeten the deal, but it doesn't give people a lot of time to look at a new proposal."

NEW YORK - Dell postponed a vote Thursday on a $24.4 billion go-private buyout plan amid opposition by major shareholders, creating new uncertainty for the former No. 1 computer maker.

A Dell (IW 500/24) statement said the shareholder meeting on the plan, which opened briefly in Texas, was delayed until July 24.

"Today's special meeting of stockholders was convened and adjourned to provide additional time to solicit proxies from Dell stockholders," the statement said. "No vote was taken on the proposed transaction prior to the adjournment."

The plan announced in February aimed to give company founder Michael Dell a chance to revive the fortunes of the Texas-based tech firm without the pressures of a publicly traded firm.

But opponents, galvanized by corporate raider Carl Icahn, have claimed the buyout at $13.65 a share undervalues the company.

"The reason it was postponed was they didn't have the votes," said technology analyst Rob Enderle. "That may motivate them to sweeten the deal, but it doesn't give people a lot of time to look at a new proposal."

Enderle said that the opposition shareholders are taking a risk, because "if the deal fails, the stock will come down sharply, to around $8."

High-Stakes Poker Game

N. Venkatraman, professor of marketing at Boston University, said that "right now it's a high-stakes game of poker," and that the value to Dell could erode without the go-private plan.

"I think the most likely outcome is that both sides come up with a new price," he said, but added that "it is clearly dangerous" for investors to hold back, "because it's not clear if these investors have an alternate plan to run the company without Michael Dell."

More Convincing Required

Jack Gold, analyst at J. Gold Associates, said he believes "there is still more convincing that needs to be done."

"I think Dell needs to go private," Gold said. "If I'm a shareholder I'm trying to maximize my value, but if the other side walks away, who is in the wings to rescue the company? I don't see how Dell shares can rise if this deal falls apart."

The Wall Street Journal reported Wednesday that holders of at least 30% of Dell were set to vote against the buyout. The plan required a majority of the shares excluding an estimated 16% held by Michael Dell and his affiliates.

Icahn proposed an alternate plan that would pay $14 per share for up to 71% of Dell stock, and recently sweetened the deal by adding one warrant for every four Dell shares, entitling the holder to one share of Dell at $20.

But Dell's board and others contend Icahn lacks financing for such a plan and that it would do little to help foster a turnaround.

Enderle said Icahn's offer was "a smoke-and-mirrors thing" and that investors would be mindful of his meddling in Yahoo! several years ago.

"The last time we saw him muck around with tech it didn't end well," Enderle said.

Icahn is backed by the investment firm Southeastern Asset Management. And another financial firm, T. Rowe Price, has indicated it would oppose the buyout.

Pzena Investment Management, which owns some 6.7 million shares, said in a statement it was prepared to vote against the buyout.

In a statement after the postponement, Icahn and Southeastern called on the Dell board and special committee "to act in the best interest of stockholders and move Dell forward," without elaborating.

Earlier this week, the two investors said they believe the go-private plan "substantially undervalues Dell and that stockholders should be entitled to choose to retain the upside potential of their Dell shares."

Dell's board contends the company needs to make radical changes to keep up with a shift to mobile computing.

Copyright Agence France-Presse, 2013

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