Dell Inc. Shares Jump After ISS Backs Founder’s LBO Offer

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Dell Inc. Shares Jump After ISS Backs Founder’s LBO Offer
By mikeandryan [CC BY 2.0], via Wikimedia Commons

Dell Inc. (NASDAQ:DELL) shares rose as much as 3 percent on Monday after a key announcement. The influential shareholder advisory firm Institutional Shareholder Services (ISS) has officially thrown its weight behind the leveraged buyout offer made by founder Michael Dell and Silver Lake Partners.

Dell Inc. Shares Jump After ISS Backs Founder’s LBO Offer

It was expected last week that the firm would back the alternative offer from Carl Icahn and Southeastern Asset Management. Today’s increase in Dell’s stock price brings it back up closer to the $13.65 per share offer originally made by Mr. Dell.

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Reasons For Backing Mr. Dell’s Offer

Bloomberg’s Aaron Ricadela and Serena Saitto report that one of the main reasons ISS gave for backing Mr. Dell’s offer was the fact that the personal computer business is struggling so much. The firm said that by voting for the leveraged buyout offer, they are sheltered from some of the risks that are linked with the fading PC business. The offer takes Dell Inc. (NASDAQ:DELL) private, thus now allowing shareholders to keep their shares.

This was one of the problems Icahn had with the offer, and he claimed that the company was practically being stolen away from shareholders. However, ISS said Mr. Dell’s offer gives shareholders a way out of the company with guaranteed value by taking the company private.

ISS also cited the 25.5 percent premium the leveraged buyout offer provided on Dell Inc. (NASDAQ:DELL)’s share price before the offer was officially announced.

Icahn’s View Of Dell

There was speculation that Mr. Dell would raise his offer for the PC maker, but he quashed those speculations almost as soon as they arose, saying that he wouldn’t need to increase it. Now that ISS backs his offer, it looks doubtful that Icahn will be able to win against Mr. Dell.

Icahn still believes there is a brighter future for Dell Inc. (NASDAQ:DELL) and that shareholders should be able to profit from the company’s future recovery. In order for Icahn to beat Mr. Dell’s offer, he must talk shareholders into rejecting the leveraged buyout offer at the annual meeting next week. In order to prevail, Mr. Dell has to secure a majority vote not counting his own shares.

Since ISS is backing Mr. Dell instead of Icahn, it’s likely that most shareholders will vote their shares in favor of him rather than the activist Icahn.

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