Michael Dell ups buyout offer; shareholder vote pushed off to Aug. 2

The founder of PC maker Dell, along with partner Silver Lake, promise to pay $13.75 per share to take the company private.

Dell founder Michael Dell, along with his partner, investment firm Silver Lake, has decided to pay more to bring his company private.

In a letter submitted to Dell's board of directors, Michael Dell said that he and Silver Lake will now pay $13.75 per share in cash to bring the PC maker private. Dell and Silver Lake previously offered to pay $13.65 per share, meaning the new investment will net shareholders $150 million more than the $24.4 billion they would have received in the initial deal.

In order to get the higher price, however, Michael Dell has a requirement: a simple majority of shareholders will be all it takes to approve the deal. In the letter presented to the board of directors on Tuesday, Dell and his partners argued that the board's allowance of a provision that shares that are not voted count as votes against the merger is "unfair," and Dell wants that changed.

"There is simply no rational basis for shares that are not voted to count as votes against the merger agreement for purposes of the unaffiliated stockholder vote," Dell and his partners wrote to the board. "If a majority of the shares held by unaffiliated stockholders who vote are voted in favor of the merger agreement, it would be unfair to deny these stockholders the merger consideration they wish to accept solely because shares not voting are counted as votes against the transaction."

Dell was supposed to hold its special conclave last week, where its shareholders would be allowed to vote whether they should accept Michael Dell's offer and bring the company private. That vote was postponed , and speculation surrounding it suggested that Michael Dell and his supporters weren't quite sure they had enough votes to gain approval.

The thorn in Dell's side is activist investor Carl Icahn, who has been consistently critical of the founder's offer. Icahn argues that the original deal undervalues the company. Icahn, who along with his partners owns a 13 percent stake in Dell, partnered with Southeastern Asset Management to offer shareholders $14 per share in cash, as well as a single warrant for every four shares they sell. That warrant can be redeemed at anytime in the next seven years for one Dell share at $20.

A special committee appointed by Dell's board suggested that Icahn's deal was not in the best interests of the company and endorsed the founder's previous offer. However, major brokerage houses, including T. Rowe Price, that own Dell shares, have come out against the Michael Dell deal. And with Icahn continuing in his bid to convince other shareholders that his deal is superior, it wasn't clear whether Silver Lake and Michael Dell could get enough votes to move forward on their original proposal.

The tenor of the letter Dell and his partners sent to the board indicates they're becoming frustrated with the process. In the letter, the partners wrote that "this is our best and final proposal," adding that the company has until 6 p.m. ET tonight to make a decision or it will be withdrawn and terminated.

In a statement, Dell said that it has cancelled today's special meeting of shareholders and plans to hold a vote on the new proposal on August 2.

This story has been updated throughout the morning.

 

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