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Dell Inc postponed a shareholder meeting until July 24, a signal that the company didn't have the votes to pass its proposed $24.4-billion sale to Chief Executive Officer Michael Dell and Silver Lake Management LLC.
The vote will be at 6 pm New York time that day, the company said at a meeting on Thursday at its Round Rock, Texas, headquarters. The delay prolongs months of jousting between the buyout group and investors seeking a higher price.
"The challenge this week for Dell and Silver Lake is to get out and contact shareholders, especially those who abstained on Thursday," said Jeff Fidacaro, an analyst at Monness Crespi Hardt & Co. "It's going to get down to the wire."
Dell and Silver Lake gain more time to win over shareholders who have balked at their $13.65-a-share proposal, saying it undervalues the computer maker. The delay also lets billionaire Carl Icahn keep agitating for a higher bid as he tries to persuade fellow investors to back his competing proposal, which would let Dell stock remain publicly traded.
"It is unfortunate, although not surprising," that Dell's board delayed the vote, Icahn said in a joint statement on Thursday with Southeastern Asset Management Inc, which has teamed with him to scuttle the CEO's buyout. "This delay reflects the unhappiness of Dell stockholders with the Michael Dell/Silver Lake offer."
Shares rise
Dell shares rose 2.4 per cent to $13.19 at 11:06 am in New York. The proposal Dell and Silver Lake put to a shareholder vote represents a premium of 25 per cent over the computer maker's closing share price of $10.88 on January 11, the last trading day before news of a deal surfaced.
CEO Dell, who founded the company as a college student in 1984, in February proposed taking it private to stem years of ebbing sales and profit as consumers shift away from PCs to tablets and smartphones. He has argued it will be easier to make investments in mobile devices and data-centre computing without the need to satisfy profit-hungry public investors.
Michael Dell and Silver Lake need a majority of shares to vote in favour of their transaction, excluding the CEO's 16 per cent stake. Since announcing the buyout on February 5, the special committee of Dell's board has argued that the company's prospects of a turnaround are better outside of the public lens.
Icahn, who holds an 8.7 per cent stake in Dell, has made a series of proposals aimed at blocking the CEO's deal. Most recently, he suggested a buyback at $14 a share that would allow Dell investors to retain equity in a publicly traded portion of the company, plus a warrant that could be exchanged for additional stock should Dell climb higher than $20.
Investors opposed
As of last week, investors opposed to the CEO's transaction owned more than 20 per cent of Dell shares, according to a report from shareholder advisor Glass Lewis & Co, which is backing Dell's bid with Silver Lake. Opponents may also include Harris Associates LP, Yacktman Asset Management Co and Pzena Investment Management Inc, according to the report.
Separately, T Rowe Price Group Inc, which holds 4.1 per cent, reiterated its opposition to the Dell-Silver Lake offer earlier this week, saying the buyout doesn't "reflect the value of Dell".
BlackRock Inc, Vanguard Group Inc, and State Street Corp, three of Dell's largest shareholders, indicated late in the week that they're voting in favour of the Silver Lake-led deal, according to a person with knowledge of the matter. BlackRock had previously been leaning against the buyout, another person said. Those funds, like any Dell shareholder, can still change their votes before the final tally.
'Uphill battle'
Representatives of all three investment firms declined to comment. Representatives for T Rowe also declined to comment and Silver Lake didn't immediately respond to a request for comment.
David Frink, a spokesman for Dell, declined to comment on the vote on Thursday.
The buyout by Dell and partner Silver Lake won key endorsements this month from Institutional Shareholder Services Inc. and two other influential proxy advisory firms. It also has the backing of a special committee of Dell's board that evaluated potential transactions on the company's behalf.
"There's a lot of CEOs that have tried to take companies private to get away from the market," said Michael Cusumano, a professor at the Massachusetts Institute of Technology's Sloan School of Management. "It's an uphill battle."
