Published On: Mon, Jul 8th, 2013

Michael Dell’s Bid Inches Towards the Finishing Line

Michael Dell / Getty

Michael Dell / Getty

/ By Clive Minchom/

Institutional Investor Services Recommends his purchase offer to Dell Inc. Investors Shareholders of computer maker Dell Inc. are due to vote on July 18th on its founder Michael Dell’s proposal to privatize the company.
Institutional Shareholder Services, the biggest proxy advisory firm in the United States, today issued its recommendation that Dell investors accept Michael Dell’s $24.4 billion share offer, to acquire 100% of the company he founded, at a price of US$13.65 per share, in conjunction with private equity firm Silver Lake Partners.

Advisers to both the bidders and to a special committee of Dell’s board had all earlier been worried that the report could well be unfavorable to the deal and thus effectively put the kybosh on it taking place.

ISS listed in the bid’s favour: “the 25.5 percent premium to the unaffected share price, the certainty of value provided by the all-cash consideration, and the fact that the transaction would transfer to the buyout group the risk of the deteriorating PC business and the company’s ongoing business transformation.”
This now eases the pressure on those Institutional shareholders who wish to tender their shares as, in the language of bureaucracies everywhere, it removes the potential for them to be criticized later for having done so if it should turn out to have been the wrong choice. While it may be that ISS didn’t particularly like the deal on offer, the fact remains that Michael Dell’s bid is the only one on the table to offer for all the company and in the end they simply could not ignore this, putting it crassly even just in terms of their own potential liability if the deal should fail and the share fall radically because of it.

The ISS recommendation comes obviously at an important moment in the life of Michael Dells take over bid as the count down to the July 18th vote accelerates. Dell shares had begun to wobble on Friday, closing at just US$13.03 as Arbs (arbitrageurs) who reportedly already hold up to 35% of the stock had begun to believe the deal might not happen and therefore began to lighten up on their holdings. There have been fears expressed that the price could go all the way back to US$7-8 dollars in the absence of a viable bid.

Now the price should firm up again when the market in New York opens later today. Already in pre-market trading this morning it has climbed back to US$13.38 , signifying the market believes this transaction will probably now go through in the end. If it does do so without Michael Dell having to raise his bid, which so far he has refused to do, that will show commendable judgment and timing on his part. Come July 18th we will doubtless all find out.

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