Did you fly to Round Rock today to vote on Michael Dell and Silver Lake’s buyout of Dell? No, you did not, even I can’t keep up that fiction any more. By my count this is the third same-day cancellation of the special meeting but everyone’s figured out the game by now. Dell will eventually actually hold a shareholder meeting, but no one will come, which will be awkward except not really because nobody really comes anyway. The proxies come, that’s what matters.
I think we can all agree that the Dell board’s latest proposal to its buyout group – to up the price from $13.65 to $13.75, not change the voting rules, but move the vote to mid-September, with an August record date – is a bad idea. I mean I’m sure we can’t all agree on the substance, but just, September? Do you want to be reading about this in September? Sheesh. Carl Icahn has some Herbalife craziness to attend to; let’s wrap this thing up.
The Dell board is in a really weird place, no? It has decided that the thing that is in the best interests of shareholders is to sell to Michael Dell and Silver Lake for $13.65 per share. Shareholders have mixed feelings about the matter, but a majority of them agree, though only a plurality of the shareholders not named Michael Dell agree.1 The board now, in its more or less absolute discretion, gets to choose between: Read more »
A fun thing about being rich is that it expands your opportunities for passive-aggressive sniping. Like, if Michael Dell wants to insult Carl Icahn, he can call up the Wall Street Journal and Bloomberg and say “hey, I was thinking about insulting Carl Icahn, if I do will you print it?,” and of course the answer is yes.1 Or if Carl Icahn wants to insult Michael Dell, he can just tweet his insults like any underemployed 26-year-old, but then he files his tweets with the SEC, which gives them an unusual gravitas, for tweets.
So those boys are having a good time. Their pretext for sniping today is a debate over who should get to vote on the Dell buyout. The current rule is that anyone who owned shares as of June 3 can vote, and that a majority of the non-insider shareholders have to vote to approve Michael Dell’s buyout. Since those rules seem to lead to the deal being voted down,2 and since Carl Icahn opposes the deal, he’s happy with the rules and thinks it’d be a massive betrayal to change them. Michael Dell, unsurprisingly, wants to change them, so as to limit the required vote to a majority of the votes cast and maybe to allow more recent buyers to vote: Read more »
You have to be a little nuts to go to a shareholder meeting, though I suppose when the meeting is to vote on a hotly contested proposal to merge the company out of existence you might have business reasons for doing so. So if you’re a merger-arb analyst following Dell closely, I hope you didn’t fly to Austin last night! If on the other hand you’re just, like, a general retired crackpot, I’d love to hear what your plans are for the next week:
Dell Inc. announced that today’s Special Meeting of Stockholders was convened and adjourned to provide additional time to solicit proxies from Dell stockholders. No vote was taken on the proposed transaction prior to the adjournment.
The Special Meeting will reconvene on July 24, 2013 at 5:00 p.m. Central Daylight Time at the Dell Round Rock campus, Building No. 2, Houston-Dallas conference room, 501 Dell Way, Round Rock, Texas 78682. The record date for stockholders entitled to vote at the Special Meeting remains June 3, 2013.
I hope someone will make a touching romantic comedy about two Dell shareholders stuck in Round Rock for a week waiting for the meeting to re-convene. Read more »
There are enough absurdities on the surface of Carl Icahn’s pseudo-proposal for Dell that you don’t need to think deeply to find more but I guess you could. One thing that might bother you if you let it is the old slicing-the-pie-to-make-more-pie thing. Why should funding Dell with more debt and less equity, and running it with less cash, make it more valuable? Icahn’s plan involves paying shareholders $16 billion in cash in exchange for reducing Dell’s net asset value by $16 billion; the total value of what the shareholders own (Dell shares -> cash + shares) should really stay the same.
This is an argument against all corporate finance structuring and nobody really believes it, though some people come close. Obviously you can make a company more valuable by financial engineering!1 There’s some debate, though, over which sorts of engineering actually work. LBOs? Definitely. (I mean, probably.) Levered recaps? Sometimes, sure. Preferred-stock-funded recaps? Umm. Maybe!
Just some random warrants? No come on that’s nuts.
I’ve made fun of Carl Icahn’s involvement in Dell a few times, because it has been pretty nutty and half-baked, but I hope that doesn’t obscure my fundamental fondness for the man. I sometimes think that we’re a lot alike: we both come to work every day with the goal of being amused by the financial world. He has billions of dollars, though, so he can create his own amusements. But then they become my amusements too, and I’m grateful.
Anyway this is pretty cute:
Dear Fellow Dell Stockholders:
We are in the process of perfecting our right to seek appraisal of our Dell shares and we believe that you should also perfect your appraisal rights. Under Delaware law if a merger occurs and you did not vote for it, you are entitled, through appraisal, to the fair value of your shares as determined by a Delaware court. We have done a great deal of due diligence concerning the value of Dell, and as we have said in the past, we believe the $13.65 merger price substantially undervalues your Dell shares, and we believe if you seek appraisal, you will receive more. BUT WHAT IS MOST IMPORTANT ABOUT SEEKING APPRAISAL IS THAT YOU CAN CHANGE YOUR MIND ABOUT APPRAISAL UP TO 60 DAYS AFTER THE MERGER AND STILL TAKE THE $13.65 PER SHARE. During the “free 60 day period” we believe Dell may wish to negotiate with those that sought appraisal and possibly pay a premium over $13.65 to get them to settle and drop their appraisal claims, as explained below. To add a new twist to an old saying, “you can have your cake and eat it too”.
What is he up to? Read more »
With today’s ISS report endorsing the Michael Dell / Silver Lake buyout of Dell, and with the market up on the likelihood that the deal will go through when shareholders vote on July 18, I suppose it’s about time to start the postmortems. How do you see the winners and losers? The opposition, led by Southeastern Asset Management and Carl Icahn, look increasingly like goofballs. Like: here was Dell, with a cash takeover signed at $13.65 per share and no competing bidders in sight. Southeastern and Icahn teamed up delightfully to both sell low and buy high: Southeastern sold millions of shares at below the deal price,1 while Icahn’s average cost in his shares appears to be at least $13.70. Throw in his share of the proxy solicitation costs and he’s out about $12 million, plus whatever he paid for the rather uninspiring financing commitments for his hypothetical tender offer, though to be fair those seem to have been payable mostly to himself. Anyway here:2 [Update: wasn't counting the June $0.08 dividend in his basis; if you include that then he's basically breaking even rather than losing $12mm. Correct chart in the footnote.2A]
Is $12mm or so a lot for Icahn to lose? No obviously not. Read more »