Updated
Dell Inc. postponed until Aug. 2 a shareholder meeting scheduled for Wednesday so proxy voting on a sweetened buyout proposal can be completed.
Michael S. Dell, chairman and CEO, and Silver Lake Partners on Wednesday raised their joint bid for the company by 10 cents a share to $13.75, contingent on changing the rules for counting the votes, according to a company filing with the Securities and Exchange Commission.
Mr. Dell and Silver Lake regard the unvoted shares as an obstacle to prevailing in the shareholder vote required to carry out their deal to take the company private. Under current voting rules, unvoted shares count against deal approval.
Some 27% of shares have not been voted, according to a joint statement Wednesday from Mr. Dell and Silver Lake. “The presumption that these shares should be treated as if they had voted against the transaction is patently unfair,” they said in the statement.
The $259.8 billion California Public Employees' Retirement System, Sacramento, doesn't plan to vote its shares until the Aug. 2 meeting, Joe DeAnda, information officer, said in an e-mail responding to questions. CalPERS owns 6.4 million Dell shares.
The C$183.3 billion (US$177.6 billion) Canada Pension Plan Investment Board, Toronto, has not voted its shares, according to its website. The number of Dell shares CPPIB owns was unavailable.
“The voting is neck and neck,” said a source close to Dell, adding there hasn't been much change in the vote since last week, when Dell's board voted to postpone the vote to July 24.
Shares not voted could determine the outcome of the proposal, the source said.
In their joint statement, Mr. Dell and Silver Lake call for changing the voting rules for approval of the proposed buyout to require a majority of only shares cast, rather than a majority of shares outstanding, according to a letter from them in the filing.
“This is our best and final proposal,” according to a letter from Mr. Dell and Silver Lake included in the Dell filing with the SEC. “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 required voting majority as they propose.
“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,” the letter included in the filing continues. “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.”
The Dell special committee of independent directors — created by the company’s board of directors to oversee the buyout proposal — had rescheduled the meeting for Wednesday after the committee postponed the initially scheduled July 18 meeting to win more shareholder support for the proposal by Mr. Dell and Silver Lake.
Mr. Dell and Silver Lake raise their price from $13.65 a share, the price which Dell’s board Feb. 5 agreed to accept in the proposal to take the company private.
The Dell committee states in the SEC filing that in delaying the vote, once again it is evaluating the proposed changes to the price and voting rules by Mr. Dell and Silver Lake. Mr. Dell and Silver Lake plan to withdraw their new proposed changes to their offer at 6 p.m. EDT Wednesday unless the committee takes action, according to the letter in Dell’s SEC filing.
The committee has not indicated whether or when it will respond to the new proposal on the voting rule changes and price.
Activist investor Carl C. Icahn and officials at affiliated Icahn funds and Southeastern Asset Management contend the deal undervalues Dell; they have offered a counter, conditional proposal.
In a tweet Wednesday on Twitter, Mr. Ichan said, “All would be swell at Dell if Michael and the board bid farewell.”
Under the buyout proposal, Mr. Dell, who would remain as chairman and CEO, would be the majority owner of Dell, while Silver Lake and its affiliated funds would own the rest of the company. Mr. Dell is now Dell’s largest shareholder, holding 13.9% of the company’s 1.7 billion shares outstanding. Dell stock traded at $12.82 a share in midday trading Wednesday.
