Proxy advisory firm Institutional Shareholder Services has endorsed the $24.4 billion buyout plan by Michael Dell for personal computer company Dell Inc. This deal highly benefits Mr. Dell, the founder and CEO of Dell Inc. over billionaire investor Carl Icahn. Icahn attempted to rally Dell shareholders to pursue his deal, including investment company Southeastern Asset Management.
Icahn’s deal was to float a proposal to buy up to 72% of existing shares while paying a special dividend and leave a portion of the company on the public stock market.
Earlier this month, we reported that Michael Dell and Silver Lake would not be increasing their bid due to a recommendation from the special committee of Dell?s board. There were talks that the ISS would be too focused on Icahn’s plan to buy Dell for $14 per share. ISS cited a 25.5% premium Dell and Silver Lake offers on Dell’s shares. They also said that the offer provides a “certainty of value.” The risk of the declining PC business would shift away from shareholders and be put on Dell and Silver Lake. Michael Dell owns around 16% of the company’s shares and isn’t allowed to vote. Shareholders control around 18%. A majority of about 43% is needed for the deal to be passed.
Another proxy firm called Glass, Lewis & Co. is still waiting to give their opinion. Fortunately for Mr. Dell, the opinion of the ISS carriers a lot of merit. The shareholder vote is taking place in ten days from now (July 18th). The vote could still be very close though because the ISS voted against a similar buyout of J. Crew, but shareholders decided to go the other route. The ISS also voted for a takeover of Dynegy, but shareholders rejected that deal.
“We are pleased that ISS has recommended, as we have, that Dell shareholders approve the $13.65 per share cash sale transaction. With the assistance of outside advisors over the course of an exhaustive 10-month process, the Committee has thoroughly reviewed Dell?s existing business plan as it seeks to transform its business model and various alternatives in support of that transformation. Given the Company?s business challenges, intensifying competition and deteriorating industry trends, a sale at $13.65 per share in cash provides the highest value and greatest certainty of any available alternative. We also believe rejection of this transaction would expose Dell and its shareholders to serious risks and uncertainties that will harm the Company?s business and erode shareholder value,” stated the special committee of Dell’s board of directors.