Dell $24.4 Billion Buyout Plan: The Nail-Biting Game


Michael Dell could take a decision to postpone the vote deadline or increase $13.65-per-share bid, according to a Bloomberg report.

Dell $24.4 Billion Buyout Plan: The Nail-Biting Game

Aaron Ricadela & Serena Saitto of Bloomberg feel if Michael Dell and Silver Lake don’t enhance their bid price, the shareholders would be put in a difficult situation.

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Dell Inc Price Could Fall To $7.90

The Bloomberg reporters quoting Angelo Zino of Standard & Poor’s Financial Services feel in case the bid amount is increased to $14-per-share, it would satisfy the needs of shareholders and hence would be enough for the buyout plan to sail through.

On the contrary, if the bid amount is not increased, it would pull Dell stock down.

According to a person with direct knowledge of Michael Dell’s thinking, if the LBO is voted down, Michael Dell predicts Dell Inc. shares would fall to about $7.90 a share, based on trailing earnings.

Likely Scenario

Quoting known sources, Aaron Ricadela & Serena Saitto of Bloomberg feel the special committee of Dell’s board might adjourn the meeting right after the commencement of the meeting.

In the meanwhile, the activist investor Carl Icahn in his yesterday’s open letter urged Dell’s board not to postpone the vote. He contended that if the special committee is not satisfied with the $13.65-per-share proposed by Michael Dell and Silver Lake, the committee should not have approved their transaction in the first place.

Carl Icahn’s Sweetened Proposal

Last week, Carl Icahn sweetened his offer by offering a warrant to his offer for Dell This revised offer would facilitate Dell shareholders to derive greater value, if the stock hits $20 per share.

The activist investor Carl Icahn in his recent letter indicated that the value shareholders would end up seeing, with the addition of the warrant, could be between $15.50 and $18 per share.

However, the special committee of Dell’s board feels if Carl Icahn’s proposal gets consummated, Dell shareholders would get $9.99 in cash and 0.18 warrants.

The founder and chief executive officer Michael Dell feels the activist investor’s proposal would add substantial debt to Dell besides curbing its financial flexibility.

For And Against The Buyout Proposal

According to shareholder advisor Glass Lewis & Co, investors owning over 20 percent of Dell Inc. (NASDAQ:DELL) shares are opposing the buyout deal. Apart from Glass Lewis & Co, the buyout deal has backing from Silver Lake and Institutional Shareholder Services, Inc.

However, activist investor Carl Icahn, Southeastern Asset Management Inc, Harris Associates LP, Yachtman Asset Management Co, Pzena Investment Management Inc, T.Rowe Price Group Inc. and BlackRock Inc have expressed their intention to oppose the buyout deal.