Arik Hesseldahl

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Michael Dell and Silver Lake Reach Last-Minute Buyout Deal

dell_brainstormMichael Dell and the private equity firm Silver Lake have raised their offer to take Dell Inc. private to $13.75 a share, with a 13-cent-per-share special dividend.

The new deal, reached mere hours before a shareholder vote was scheduled to take place, values the company at nearly $24.9 billion.

Sources familiar with the negotiations say that a deal was reached in principle Wednesday night, and that details were worked out into the night on Thursday.

The special committee of Dell’s board moved the shareholder vote from today to Sept. 12, buying more time to solicit shareholder support.

In exchange for the higher offer, Dell and Silver Lake would receive the voting rights modifications they requested last week. Those modifications would give the buyout proposal a chance of passing a shareholder vote. Under current rules, non-voting shareholders are counted in the “opposed” column on the shareholder vote. Because CEO Michael Dell is not allowed to vote, the majority of shareholders needed is 43 percent.

According to sources familiar with the terms of the deal, the 13-cent dividend is being underwritten by Michael Dell, who is moving his own shares of the company into the financing pot as a “substantial discount.” Exact terms of this portion of the deal couldn’t be learned, but will be disclosed in a forthcoming filing with the U.S. Securities and Exchange Commission next week. Previously, the CEO had rolled his own shares into the financing package at a value of $13.36.

Earlier this week, the deal appeared to be near collapse, after the special committee rejected an earlier request by Dell and Silver Lake to change the voting rules.

Carl Icahn, the activist investor and Dell’s second-largest shareholder, opposes the buyout and has proposed his own recapitalization plan, offering $14 a share for up to 72 percent of company shares, a special dividend paid out of cash and new debt, and warrants to buy more shares over the course of seven years.

Here’s the statement from Dell, which crossed the wires about two minutes ago:

Michael Dell and Silver Lake Agree with Dell Special Committee to Increase Purchase Price to $13.75 Per Share, Provide for Company to Pay Special Dividend of $.13 Per Share and Guarantee Payment of Third Quarter Dividend of $.08 Per Share

Revised Agreement Brings Total Consideration to at Least $13.88 per Share, Increases Aggregate Value to Unaffiliated Shareholders by at Least $350 Million and Requires Approval of Majority of Disinterested Shares Actually Voted
Special Committee Will Reset Record Date to August 13 and Adjourn Special Meeting to September 12

ROUND ROCK, Texas — (BUSINESS WIRE) — 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 $350 million, as follows:

Increases the purchase price to $13.75 per share from $13.65 per share

Provides for payment of a special dividend at or before closing of $0.13 per share

Guarantees that the third quarter dividend of $0.08 per share will be paid at or before closing

The effect of the guarantee of the third quarter dividend is to potentially increase the total consideration payable to unaffiliated stockholders by an additional $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, the voting standard has been modified such that the improved transaction will require approval by the majority of disinterested shares actually voting on the matter.

The Committee intends to establish a new record date of August 13, 2013 for shareholders eligible to vote on the transaction at the Special Meeting which will be adjourned from August 2, 2013 to September 12, 2013 at 9:00 a.m. Central Time.

The amended transaction also includes 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 reduced from $450 million to $180 million.

Alex Mandl, Chairman of the Special Committee, said, “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.”

Mandl continued, “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


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