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Dell Inc. Cuts Revised Deal with Founder Michael Dell and Silver Lake Partners

Michael Dell / Getty

Michael Dell / Getty

/ By Clive Minchom /

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We wrote this morning there were indications that the shareholder vote on the Dell buy-out offer that was scheduled for today might be in some jeopardy, and that the vote might even be postponed again provided Michael Dell and his partner Silverlake Partners came up with a better offer. Well they have and it was.

The Special Committee of the Board of Dell Inc. (DELL) today announced that it has entered into a revised definitive merger agreement with Michael Dell and Silver Lake Partners that increases the aggregate value to unaffiliated shareholders by at least US$350 million, as follows: it increases the purchase price to US$13.75 per share from US$13.65 per share; it provides for payment of a special dividend at or before closing of US$0.13 per share and it guarantees that the third quarter dividend of $0.08 per share will be paid at or before closing.

DELL goes on to note that the effect of the guarantee of the third quarter dividend is to potentially increase the total consideration payable to unaffiliated stockholders by an additional US$120 million depending on whether the closing would otherwise have occurred prior to the record date for that dividend.

In return for the increased value to shareholders, DELL has agreed to modify the voting standard for the transaction so that the improved transaction will now require approval by the majority of disinterested shares actually voting on the matter – i.e. abstentions will no longer count as a “no” vote.

To prepare for the final vote on this transaction the Special Committee is establishing a new record date of August 13, 2013 for shareholders eligible to vote on the transaction. The vote itself will be at the Special Meeting called for the purpose which will now be adjourned from today, August 2, 2013, when it was currently scheduled to have been held, to September 12, 2013 at 9:00 a.m. Central Time. The effect of the revised record date itself will permit many new shareholdings, including potentially those who can be characterized as “arbitrageurs” to vote on the deal.

In return for agreeing to these amended terms the company succeeded in obtaining from Michael Dell and Silverlake Partners a reduction of the breakup fee that would be payable in the event the merger agreement is terminated and within 12 months thereafter the Company effects a recapitalization transaction that does not result in there being an absolute majority stockholder of the Company. That fee is now reduced from US$450 million to just US$180 million.

Alex Mandl, Chairman of the Special Committee of DELL, said announcing the new agreement, “The Committee is pleased to have negotiated this transaction, which provides as much as $470 million of increased value, including the next quarterly dividend that will now be paid regardless of when the transaction closes.”

Mr. Mandl also lays out the reasoning behind the Special Committee’s decision, “We believe modifying the voting standard is in the best interests of Dell shareholders, both because it has enabled us to secure substantial additional value and because it provides a level playing field for the decision facing shareholders. The original voting standard was set at a time when the decision before the shareholders was between a going-private transaction and a continuation of the status quo. Since then, the nature of the choice facing shareholders has changed because of the emergence of an alternative proposal by certain stockholders. In the context of the current decision, the Committee does not believe it is appropriate to count shares that have not been voted as having been voted in support of any particular alternative. Accordingly, we have changed the voting standard to require that the going-private transaction receive the approval of a majority of the disinterested shares that are actually voted. By resetting the record date and providing abundant notice of the new meeting we are ensuring that all disinterested shareholders, including those who have acquired their shares since June 3, have ample opportunity to vote for or against the transaction. We urge all shareholders to support this transaction.”

The revised definitive merger agreement has been approved by Dell’s Special Committee and by the independent members of Dell’s Board of Directors.

Wow! Now the game is on and the vote on September 12th should give us the definitive outcome of what is now a US$24.8 billion deal.


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