Dell Buyout Vote Delayed

(Austin American-Statesman/MCT) -

A highly anticipated vote on Dell Inc.’s future as a publicly owned company was postponed Thursday morning.

Shareholders met to consider a $24.4 billion buyout offer by Michael Dell and his financial ally, Silver Lake Partners.

But just a few minutes after the meeting was convened, members of the special committee to Dell Inc.’s board of directors quickly moved to postpone the vote.

The adjournment was a move for Dell to buy more time to solicit more proxy votes from stockholders, said Alex Mandl, chairman of the special committee overseeing the buyout. The meeting will reconvene July 24, he said.

Analysts said the postponement shows the vote on the buyout is extremely close and that the company is working to sway shareholders.

Roger Kay, an analyst with Endpoint Technologies Associates, said Thursday’s delay is an indicator that Dell’s side doesn’t have enough votes.

“Delaying is not a preferred tactic, but it’s the better of two bad choices,” he said. “The very bad choice would be to have the vote and lose. And they did not want to have that outcome.”

Still, some large swing shareholders reportedly switched sides recently: Reuters reported that Vanguard and BlackRock Inc. now support Michael Dell’s proposal. His offer of $13.65 a share was tentatively accepted by the Dell board in early February.

But two major investors, billionaire activist Carl Icahn and Southeastern Asset Management Inc. of Memphis, are leading the fight to defeat the buyout. Other major investors, including T. Rowe Price Group, have said recently that they intend to vote against the buyout.

Icahn called the delay “unfortunate, although not surprising,” in a statement.

“We believe that this delay reflects the unhappiness of Dell stockholders with the Michael Dell/Silver Lake offer, which, we believe, substantially undervalues the company,” he said. “This is not the time for delay but the time to move Dell forward.”

Icahn and Southeastern together own about 12.5 percent of Dell Inc.’s stock, making them the largest outside investors at Dell. Michael Dell and a group of Dell senior managers together own or control nearly 16 percent of the stock. But under the terms laid out, the shares of Michael Dell and management insiders won’t be counted in the vote on the buyout.

The Wall Street Journal reported that as of Thursday, about 77 percent of the shares eligible to count were voted in the deal, according to people familiar with the matter. (That figure doesn’t include shares controlled by Dell.) Turnout is important because an abstaining vote counts as a “no” vote in this deal.

If the buyout wins approval, Michael Dell has said he intends to take the company private in order to complete the business transformation that his company started several years ago. The company has made more than $13 billion in technology acquisitions since 2008, to help turn it into a leading supplier of advanced hardware, software and services for large and mid-sized enterprise customers.

But several major shareholders, led by Icahn and Southeastern, have objected to the offer price almost from the beginning, saying that the share price undervalued Dell Inc.’s potential prospects as one of the world’s larger information technology companies.

Linda Bush, an Austin, Texas resident and longtime Dell stockholder who attended the meeting, said she talked to other shareholders and the consensus was that Dell’s asking price was too cheap.

“There was a lot of sentiment against it,” she said.

If the buyout proposal is defeated, Dell Inc. will remain a public company and Michael Dell will remain as CEO. He has pledged to work to improve the company, and to fight the sort of restructuring deals that Icahn is suggesting.

Kay said remaining a public company would slow the transformation process that Michael Dell is proposing, because he needs to maintain revenue growth and profit to satisfy Wall Street.

“What he really wants to do is basically put revenue growth on hold, take profit and put it toward investment, and use that to transform the company. So it would be a period of fairly ugly financials if they were a public company.”

Slowing the transformation process would be problematic, Kay said, “because they may not have that much time.

“In other words, they really do need to effect this transformation sooner rather than later,” he said. “Because the industry doesn’t wait around.”