Michael Dell raises offer by a dime to tweak voting rules

Michael DellMichael Dell and private equity firm Silver Lake Partners consortium yesterday raised their bid for PC maker Dell Inc by 10 cents, or a dime, to $13.75 a share but want the voting rules tweaked in order to secure shareholder support.

The consortium said in a statement that the sweetened offer is their ''best and final proposal.''

But the consortium has put conditions  to its revised offer, which many see Michael Dell tweaking the rules of the game midway in his favour.

He says that the company special committee must drop a rule that treats shares not cast either for or against the deal, as votes against the deal.

''The will of the majority of the unaffiliated shares voting on the transaction should not be thwarted by an unfair standard that counts unaffiliated shares not voting as 'no' votes,'' Michael Dell and Silver Lake said in a statement. ''If this majority wishes to accept our offer, it is only fair to permit them to do so.''

The demand would mean that Michael Dell's 16-per cent stake cannot be counted in the vote in order to get more than 42 per cent of Dell's shareholders voting in favour of the deal.

Dell said that in light of the revised offer, it is postponing shareholders meeting to vote on the deal scheduled yesterday to 2 August.

''In light of the revised proposal, which the Special Committee is evaluating with the assistance of its financial and legal advisors, the Special Meeting of Stockholders previously scheduled to be reconvened today at 5:00 p.m. Central Daylight Time at the Dell Round Rock Campus, 501 Dell Way, Round Rock, Texas 78682 will be adjourned to August 2, 2013 at 9:00 a.m. Central Daylight Time at the same location,'' the Texas-based company said in the statement.

The latest move comes after the company had postponed the shareholders meet, earlier slated for last week, within minutews after Michael Dell failed to secure enough votes for his proposal.

An approval of the revised offer would end a six-month takeover battle between the company founder and CEO Michael Dell and billionaire activist investor Carl Icahn, who is being backed by Southeastern Asset Management.

Michael Dell had in February proposed to take private the company he founded in his dorm room in 1984, for $24.4 billion.

Last week, Icahn had raised his bid to about $15.50 to $18 per share by proposing buy back 1.1 billion shares at $14 per share and added a warrant for every four shares tendered,  that would give shareholders the right to buy one Dell share for $20 over the next seven years, valuing Icahn's revised offer from about $15.50 to $18 per share.

Icahn, along with Southeastern Asset Management, who together hold nearly 13 per cent in the company, have been opposing Michael Dell's $13.65 per share offer, arguing that he is attempting to buy the world's third-largest PC maker at a steep discount. They also want the entire board replaced.

In order to derail Michael Dell's plan to take the company private, Icahn had even urged shareholders to get their shares appraised in a Delaware court.

His suggestion came a few days after three proxy advisory firms - Institutional Shareholder Services, Glass Lewis and Egan Jones - backed Michael Dell's offer and recommended to shareholders they accept the deal rather than risk further exposure to a deteriorating PC market.

But another institutional investor T Rowe Price,  a major Dell shareholder, still opposes Michael Dell's offer although others like BlackRock, State Street and Vanguard have now supported the founder's buyout proposal.

Reacting to Micheal Dell's revised bid with conditions, Icahn said that changing the rules of the vote would remove an important shareholder protection. He once again called for the CEO and the board to be replaced.

''We have spent the past six months explaining why we believe that not only does the Michael Dell / Silver Lake transaction undervalue the company, but it also freezes out loyal stockholders who deserve the opportunity to stay with Dell,'' Icahn said in a letter.

''Today, Michael Dell and Silver Lake crossed the Rubicon by trying to take away the one provision in the merger agreement that actually provided stockholders with a voice in their company. It is time for Michael Dell and this board to go.''

With the introduction of inexpensive tablets and low-end machines used primarily for consumption in mature and developed markets, the global PC and mini-notebook market has shrunk, denting the bottom line of PC manufacturers.

In its second quarter PC shipments report released on Wednesday, technology research firm Gartner said that global sales of PC's have fallen for the fifth quarter in a row, making it the "longest duration of decline" in history. (See: PC sales fall for the fifth consecutive quarter: Gartner)

Gartner said that Dell's shipments for the quarter declined compared to a year ago, but its 2Q13 results showed a smaller decline than the past several quarters.  Although Dell showed good growth in the US and Japan, it struggled to increase shipments in Asia / Pacific and the EMEA.

Michael Dell, who holds nearly 16 per cent in Dell Computers, has often said that he would like to restructure the company away from the critical eye of Wall Street by cutting costs and jobs, diversifying into the more profitable data storage and enterprise software business.

Icahn and Southeastern Asset Management would stand to lose hundreds of millions if shareholders vote in favour of Michael Dell's offer.