Michael Dell and Silver Lake Partners’ buyout proposal at $13.65 per share could be their best and final offer, according to a recent report in Bloomberg.
With the July 18 shareholder meeting just a day away, the buyout group could stick to its original $24.4 billion offer.
Earlier this year, founder and CEO Michael Dell made the original buyout offer for his company. It involves paying Dell Inc. (NASDAQ:DELL) shareholders $13.65 per share and then taking the PC maker private. The buyout proposal from Michael Dell and the private-equity firm Silver Lake Partners received support from the influential shareholder advisory firm Institutional Shareholder Services.
Dell Enhanced Borrowing Cost, Dwindling PC Earnings
Serena Saitto of Bloomberg, citing people familiar with the situation, indicated Michael Dell and Silver Lake currently feel their bid represents a significant premium, as the cost of borrowing has increased and Dell Inc. (NASDAQ:DELL)’s earnings have shrunk since the time they made their original offer.
According to an earlier report, a special committee of the Dell Inc. (NASDAQ:DELL) board is reportedly considering delaying the July 18 shareholder vote on the $24.4 billion buyout plan.
With the originally scheduled shareholder meeting, voting on the offer is just too close to call, and Dell may delay the vote to gain time to win support for the deal.
Shareholder Voting Could Be Delayed by a Week
According to the Bloomberg report, the special committee of the board is contemplating delaying the shareholder voting by about a week.
Last week, activist investor Carl Icahn sweetened his offer by tendering a warrant to his offer for Dell Inc. (NASDAQ:DELL) which would enable Dell shareholders to derive greater value if the stock hits $20 per share.
Over 20 Percent Oppose the Dell Buyout Deal
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.
Investors Demand to Hold Dell’s Bonds
Incidentally, Bank of America Merrill Lynch index data revealed that the extra yield investors demand to hold Dell Inc. (NASDAQ:DELL)’s bonds rather than government debt has climbed to 358 basis points, or 3.58 percentage points, from 308 on Feb. 5.