Michael Dell and private equity firm Silver Lake likely will not be increasing their $24.4 billion offer to take Dell Inc. private, according to sources with Bloomberg. Mr. Dell and Silver Lake are not going to increase the offer because they believe that the $13.65 per share offer that they made in February represents a fair and significant premium where the stock would trade if the deal falls through.
In twelve days on July 18th, there will be a shareholder vote to determine whether a deal with Michael Dell should take place over a potential deal with billionaire investor Carl Icahn. Institutional Shareholder Services Inc. is likely going to lean towards a negative recommendation on Michael Dell’s proposal. Earlier this month, we reported that Carl Icahn and Jefferies have lined up $5.2 billion in loan commitments to buy out Dell.
The special committee of Dell’s board recommended Mr. Dell and Silver Lake not to increase their offer, according to Bloomberg’s sources. The board negotiated six price increases before agreeing to the buyout offer that was made in February.
Mr. Dell decided to personally finance the last and final price increase with $500 million in cash and committed to roll over 273.3 million shares at $13.36 per share. Mr. Icahn has an 8.7% stake in Dell and proposed that the company makes a tender offer of around 1.1 billion shares at $14 per share. Mr. Icahn believes that the offer made by Mr. Dell and Silver Lake is too cheap and gives shareholders the opportunity to profit from improvements made from Dell’s performance.
If Carl Icahn wins the bid, he would gain about 22% ownership of the company while Michael Dell’s stake would grow to around 41% without contributing shares to Icahn’s proposal. Since Michael Dell would have a larger stake, he believes he could start a proxy battle against Carl Icahn to regain control of the company if his deal does not win.