Share

Dell board backs CEO's buyout offer

New York - The board at Dell said that a takeover bid led by the company's founder and CEO is in the best interest of the slumping PC maker's shareholders and asked them to approve the deal when it's put to a vote in July.

The Round Rock, Texas, company's announcement on Friday amounts to the latest volley in a battle with prominent shareholders over the company's future and Michael Dell's role in it.

Dell directors unanimously recommended an offer from Michael Dell and the investment firm Silver Lake Partners to take the company private for $24.4bn, or $13.65 per share, according to filings with the Securities and Exchange Commission.

A board special committee told shareholders in an open letter on Friday that Michael Dell's option was the best alternative, and that it offered certainty and "a very material premium" in a challenging business environment.

It noted that the $13.65 per share price represented a premium of about 37% over the stock's average closing price in the months before rumors about a potential deal surfaced.

But billionaire investor Carl Icahn and others have complained that the price was too low. Icahn and Southeastern Asset Management, Dell's largest independent shareholder, pitched an alternative earlier this month that would let Dell shareholders keep their stake in the company and give them either $12 per share in cash or additional shares.

The committee has said that it needs more information on that deal.

It also said Friday that shareholders would retain substantial risks if the company took on debt to afford a special payout, a process known as "leveraged recapitalization." With the buyout, the risk shifts to the parties buying the company.

Icahn and Southeastern own more than 12% of Dell shares combined, a total that trails only Michael Dell. They have said they will work to convince other Dell shareholders to reject the Michael Dell buyout. Icahn also has said Michael Dell would no longer be running the company if his proposal won out.

Icahn has nominated himself and 11 other candidates for spots on Dell's board. But the company hasn't scheduled an annual meeting at which it will elect directors.

The board said on Friday it may not do that if shareholders vote for the buyout at the July 18 special meeting, which will be held at the company's Round Rock, Texas, headquarters.

Neither Icahn nor Southeastern immediately returned calls from The Associated Press Friday morning.

The special committee formed last August after Michael Dell told the board he was considering a plan to take the company private.

It said it negotiated six price increases with Michael Dell, who made the buyout offer with the investment firm Silver Lake Partners. The committee said it also contacted 21 strategic and 52 financial buyers, but a superior offer did not materialize.

Dell and other personal computer makers have seen sales crumble because of the growing popularity of smartphones and tablets. Michael Dell believes he can turn the company around by taking it private and diversifying into niches, such as business software, data storage and consulting.

Dell said earlier this month that its earning sank in its latest quarter to $130m, or 7 cents per share, compared to $635m, or 36 cents per share last year. Revenue also dipped 2% to $14.1bn.


We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.91
+0.1%
Rand - Pound
23.87
+0.1%
Rand - Euro
20.38
+0.2%
Rand - Aus dollar
12.31
+0.2%
Rand - Yen
0.13
+0.1%
Platinum
908.05
+1.2%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders