Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Dell and Silver Lake Increase Buyout Offer to $13.75

chariots-of-dell-icahnMichael Dell and the private equity firm Silver Lake have done what they said they wouldn’t do, no matter what: They have increased their bid to buy out the computing company Dell by 10 cents, to $13.75 a share. The offer pours an additional $150 million into the pot for unaffiliated shareholders.

In a letter just released, Dell and Silver Lake Managing Partner Egon Durban called their increase their “best and final offer.” Dell’s board adjourned the shareholder meeting that had been scheduled for today until the afternoon of Aug. 2.

Dell is also asking the board to approve a change in the voting rules on the transaction. They want it to be approved by a majority of shareholders who are actively casting votes either for or against the transaction. Under previous rules set by the board’s special committee, non-votes counted essentially as “no” votes. When the first votes were tallied, as many as 22 percent of eligible shareholders had not cast a vote.

Dell shares rose by more than three percent in premarket trading, to $13.42, by 8:30 am ET.

Michael Dell and Silver Lake had been under pressure to raise their bid, and my guess is that the additional funding is coming out of Dell’s pocket and not from Silver Lake, though more details about that will emerge in the coming hours and days.

Carl Icahn, the activist investor who has been stalking Dell for months, has made several different offers to recapitalize the company. His current offer calls for buying out 72 percent of shares at a price of $14. On top of that, he’s offering a seven-year warrant to buy additional shares at a strike price of $20, and to pay a special dividend. The remaining shares would continue to trade publicly.

Expect a response from the Icahn camp before the end of the day.

You can read the press release, and the letter from Dell and Silver Lake, below:

Dell Special Committee Receives Revised Proposal from Michael Dell and Silver Lake
Buyer Group Offers $13.75 Per Share in Cash Subject to Certain Conditions
Special Meeting To Be Adjourned To August 2

ROUND ROCK, Texas — (BUSINESS WIRE) — The Special Committee of the Board of Dell Inc. (DELL) announced today that it has received a revised proposal from Michael Dell and global technology investment firm Silver Lake under which they would increase the price at which they would acquire the company to $13.75 per share in cash, subject to certain conditions.

In light of the revised proposal, which the Special Committee is evaluating with the assistance of its financial and legal advisors, the Special Meeting of Stockholders previously scheduled to be reconvened today at 5:00 p.m. Central Daylight Time at the Dell Round Rock Campus, 501 Dell Way, Round Rock, Texas 78682 will be adjourned to August 2, 2013 at 9:00 a.m. Central Daylight

Time at the same location.
The proposal letter follows:

July 23, 2013
Special Committee of the Board of Directors of Dell Inc.
c/o Debevoise & Plimpton LLP
919 Third Avenue
New York, New York 10022
Attention: Jeffrey J. Rosen

Dear Members of the Special Committee:

In light of the circumstances surrounding the Dell Inc. (the “Company”) stockholders’ consideration of the proposal to adopt the merger agreement between the Company and Denali Holding Inc. and certain of its affiliates, we propose amending the merger agreement as described below. We believe these amendments are fair and in the best interests of the Company’s unaffiliated stockholders and provide the best alternative available to the Special Committee to maximize stockholder value.

Our proposed amendments to the merger agreement are as follows:

1. increase the merger consideration to $13.75 in cash per share of Company common stock, representing an increase in the consideration to be paid to unaffiliated stockholders of approximately $150 million; and

2. modify the “Unaffiliated Stockholder Approval” requirement in the merger agreement to provide that the voting requirement is the approval of a majority of the outstanding shares held by the unaffiliated stockholders that are present in person or by proxy and voting for or against approval of the merger agreement at the stockholder meeting.

This is our best and final proposal. We are not willing to discuss any further increase in the merger consideration nor are we willing to increase the merger consideration to $13.75 per share without the change to the Unaffiliated Stockholder Approval requirement described above. If the Special Committee believes that it would be appropriate to reset the record date for the special meeting in connection with this change to the Unaffiliated Stockholder Approval requirement, we would be ready to accept a new record date so long as the resulting delay in the special meeting is the minimum required by law.

We believe our proposed change to the Unaffiliated Stockholder Approval requirement is fair and reasonable to the Company’s unaffiliated stockholders, particularly in the context of our willingness to increase the merger consideration. 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. 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.

We welcome the opportunity to discuss this proposal with the Special Committee and its advisors as soon as possible. This proposal will automatically be withdrawn and terminate at 6:00 p.m. New York time on July 24, 2013, unless extended in writing by us in our sole discretion. No legally binding obligation will be created on any person with respect to this proposal unless and until a mutually acceptable definitive amendment to the merger agreement has been entered into by the parties.

We look forward to your response.

Sincerely,
DENALI HOLDING INC.
By:__/s/_____________________
Name: Egon Durban
By:__/s/_____________________
Name: Michael S. Dell


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