Michael Dell Urged To Increase Buyout Offer – Report

Michael Dell is reportedly facing increased pressure to increase the buyout offer for his namesake company, or potentially risk shareholders rejecting his bid later this month.

The $24.4 billion (£15.6bn) proposal from Michael Dell and private equity firm Silver Lake Partners to buy the PC maker and take it private has been criticised by some major shareholders since it was proposed in February. However, with the 18 July shareholder meeting to vote on the bid about two weeks away, Michael Dell and Silver Lake find themselves facing other challenges.

Icahn Pressure

Notably, investors Carl Icahn and Southeastern Asset Management have gotten the necessary financing for their counteroffer for the company and are pressuring the Dell board of directors’ special committee that is reviewing the company’s options to claim their proposal is superior to Michael Dell’s.

At the same time, the influential Institutional Shareholder Services is expected to issue its report on the Michael Dell-Silver Lake bid next week, and reports are surfacing that the ISS will most likely recommend that shareholders vote against it.

In the face of the Icahn bid and the ISS reports, the special committee, increasingly concerned about the future of Michael Dell’s proposal, over the weekend suggested to the CEO and Silver Lake that they up the $13.65-per-share (£8.73) offer to increase its likelihood of being accepted by shareholders. Both Bloomberg and the New York Times said Michael Dell listened to the committee’s recommendation, but has not yet responded. Citing a “person close to” Silver Lake, the New York Times said that Dell and Silver Lake officials have not discussed raising the price.

Michael Dell has argued that taking the company private is important to its efforts to transform from a PC maker to an enterprise IT solutions and services provider. Dell, like other established tech vendors such as Hewlett-Packard, Intel and Microsoft, is being impacted by the decline in sales of PCs worldwide, as consumers and business users turn their focus of tablets and smartphones.

Dell over the past few years has spent billions of dollars buying dozens of companies to shore up its capabilities in such areas as storage, networking, cloud, security and software. However, Michael Dell said that going private would enable him and other Dell executives to accelerate the transformation efforts outside of the glare of Wall Street attention.

However, Icahn, Southeastern and other investors have said the CEO’s $13.65-per-share offer greatly undervalues the company, and that it greatly benefits Michael Dell and Silver Lake at the expense of investors.