The Dell Special Committee, which was established to protect shareholder interests during the buyout, announced Friday that it has accepted a higher offer from Michael Dell and Silver Lake Partners, the private equity firm with which the CEO is financing the proposed deal. By doing so, the Committee has agreed to a change in the voting procedure that dramatically improves the likelihood investors will approve the buyout.
Under the new terms, investors will receive $13.75 per share, up from the $13.65 previously offered. The deal will additionally pay a special dividend of 13 cents per share, and shareholders will receive a third-quarter dividend of 8 cents per share.
The buyout attempt, which began in February, appeared vulnerable in recent weeks. Activist investor Carl Icahn, who wants to oust Dell as CEO and keep the company public, had gained so much opposition support that Michael Dell had twice delayed shareholder votes, first on July 18, and then again on July 24.
Under the original voting rules, shareholders who did not cast votes were automatically counted as "no." According to the New York Times, the buyout bid had the support of the majority of known votes, with around 579 million in favor and 563 million against. That left 334 million votes up in the air, however, and with all of them counting as "no" until cast otherwise, Michael Dell evidently did not like his prospects.
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Last week, the CEO offered to boost his bid to $13.75 per share if the Special Committee agreed to drop uncast votes from the tally. Icahn, who had already admonished Dell for delaying the shareholder vote, responded by filing a lawsuit seeking to block any rule changes.
At the time, Michael Dell called the new proposal his "best and final" offer. This turned out not to be the case, as the Special Committee announced earlier this week that it could not accept his terms.
The Committee countered, however, that it was willing to establish a new record date, which determines which shareholders are allowed to participate, on a $13.75 per share offer. The new record date was still to be subject to the original voting rules, however, with uncast votes counting against the proposal by default.
This counteroffer became the basis for the new deal. Following additional negotiations, Michael Dell ultimately secured the rule change he wanted. The voting standard now requires approval from only "the majority of disinterested shares actually voting on the matter."
The new agreement boosts the buyout bid's chances in several ways.
The change in voting procedure is a clear win for Michael Dell. Until shareholders actually vote, nothing is certain. But now that non-voting shares will not impact the total, the CEO's plan appears to have the support it needs.
The offer also now includes the new record date that the Special Committee proposed in its counteroffer. The Committee said it intends to establish August 13, 2013, as the new date. Doing so enables shareholders who bought their shares after June 3, the original record date, to vote. This shift enables participation from hedge funds, arbitrageurs and others who are likely to support the buyout.
Shareholders are now scheduled to vote September 12, 2013. The date could mark the end of Dell's current incarnation as a public company. But Icahn has been a determined opponent, and Michael Dell has already revised one "final" offer. Only time will tell.