The Dell drama is nearing a climax

Michael Dell's bid gets key backing from Institutional Shareholder Services as shareholders get set to vote soon.

By Jonathan Berr Jul 8, 2013 10:38AM
When Michael Dell earlier this year announced a $24.5 billion deal to take private the company he founded while he was in college, he promised to "deliver immediate value to stockholders." Now, CEO Dell is coming under increasing pressure to keep his word because of a rival offer for Dell (DELL) from billionaire Carl Icahn.
Media reports indicate that the board of directors' special committee encouraged Michael Dell to hike his $13.65-per-share bid, advice that Bloomberg News said he didn't take. Dell and his partner, Silver Lake Asset Management, believe their offer represents a "fair and significant premium to where the stock would trade if the deal fell apart," the news service said.

Michael Dell was also unwilling to dip further into his personal fortune to finance the deal because of the deterioration in the company's PC business, and neither was Silver Lake. The shareholders' vote on the buyout is scheduled for July 18, and The Wall Street Journal said "the threat of shareholder rejection of the buyout is real." If that happens, shares of the Round Rock, Texas, company would plummet.

Thel Dell-Silver Lake bid was backed on Monday by Institutional Shareholder Services, a decision that The New York Times described as "somewhat of a surprise" and that the Icahn offer presented its own risks because shareholders would also need to reject Michael Dell's plan and replace the entire Dell board.

File photo of a logo on a Dell computer (© Matt Rourke/AP)Currently Dell's second–largest shareholder, Icahn has called for the company to buy back 1.1 billion shares at $14 each. Dell's special committee said an earlier Icahn plan to acquire 58% of the company for $15 a share might be "superior" to the Dell-Silver Lake bid.

Michael Dell figures he can retain control of the company if the buyout fails. And even if Icahn succeeds, the activist investor would own only about a 41% stake in the company.

Dell's shares have seen strong gains of more than 27% so far this year, mainly due to the buyout offer and speculation about higher bids. The stock slumped on Friday as hope for a higher buyout offer faded, and it fell further in early Monday trading.

Given the huge uncertainty around Dell the company and Dell the CEO, investors should avoid the stock for the foreseeable future. Indeed, Michael Dell expects his company's stock to hit about $7.90 if his buyout offer is voted down. That would down nearly 72% from where it currently trades.

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
Tags: DELL
10Comments
Jul 8, 2013 10:59AM
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This should be a lesson to anyone who wants to take a company public. Wall Street has a way of forcing you out of your own company, and ruining it, then sell it off on pennies on the dollar.
Jul 8, 2013 11:18AM
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Even though Dell claims to be American too many positions are held by foreigners.  Dell is another company who has exported jobs to other countries like India.  If you need technical support or if you have customer service problems most likely you'll be speaking to someone from India who's english is bad and their understanding of english is no better.  They have poor customer service and don't seem to be willing to take care of the customer not only on equipment issues but advertising as well.

Jul 8, 2013 11:23AM
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There's no drama sold it all 9 months ago!
Jul 8, 2013 3:27PM
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SInce the new Dell has changed its warrantee coverage, and will now charge flat fees after such a short ownership of their products, I say they are only interested in profit, and not so much in keeping the good image of the name, while hiring a work-force who resides totally outside of the US, while we need the jobs here desperately, as a reason to show them the door, no matter who owns them! 

 

Dell representatives hang up on us, send us to invalid numbers, or send us back into queues and force users to play games with mech-answer machines that rarely connect to a live person, and when they finally do, they often have to refer us to go through the whole process again, and answer the mech-monster in a different way, because the mech-monster was not clear in the first place!

 

 I have been fine with my Dell PC capability when it works, but the service is terrible, and they change their policies without notifying the customers until after we have a problem needing attention, or they give us sour grapes!

 

The number of times I have had to contact them, due to a lousy monthly Microsoft update, while they act like I am the only person in the world with a unit displaying that problem is outrageous. After spending hundreds of dollars updating to Windows 7, to fix the problem that returns on the very next monthly update is a travesty! Dell does not keep up with their ownership responsibility, and are willing to convince users that for a hundred bucks they will fix it, while changing so many things, it may take days to find all the mistakes they left behind!

 

I have spent literally days on-line with their "from the book" technicians I have had trouble understanding, or mostly getting ignored by! Then finding out it was a microsoft update that didn't even bother to check what updates had already been applied, while Dell sales is ready for our dollars to buy the newest Microsoft offering that doesn't do any better on the next update that does the same thing on the new Windows system.

 

Mostly the problems are from Outlook access to the internet, or MSN access, so now I have to rely on Google.com as a back-up way to get to my mail and news, while I must prepare for hours of irritation from rooms of technicians in a fishbowl I have had the displeasure of hearing in the background for days at a time. There is better service to be had! There is much better pricing than what Dell offers! Let them go.....

Jul 8, 2013 5:05PM
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The people at Dell better watch what they do. When Dell first showed up, the PC's were good. The customer care was good.

 

After 10 years, maybe a few less, their PC's started using junk parts, cust. service went overseas, and it all came crashing down.

 

He had the plan right in the beginning. If he's planning on moving back to that plan, the company will be good again.

 

Just some thoughts from a once upon a time Dell owner, and Network Admin/Pc tech/geek.

Jul 8, 2013 2:02PM
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Dell and HP should merge. Don't cry what about competition because as it stands, America is only about the illusion of choice and competition, without actually benefiting the shareholders nor the consumers, but only a select few executives and CxO's.  

Dell vs. HP vs. IBM
Coco Cola  vs. Pepsi
Proctor & Gamble vs. Johnson & Johnson vs. Unilever
Ford vs. GM
Microsoft vs. Apple
Airbus vs. Boeing
McDonalds vs. Burger King 
Visa vs. Mastercard
AT&T vs.  vs. Verizon vs. Comcast
Budweiser vs. Miller
Fedex vs. UPS
CVS vs. Walgreens
Hasbro vs. Mattell
Dunkin Donut vs. Starbucks

You get the picture

Jul 8, 2013 4:35PM
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Speaking of climax, I just shot a load all the way up to the ceiling tiles. 
Jul 8, 2013 4:52PM
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I will be voting against Dell deal and FOR ICAHN !!!!!!!!!!!
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