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:
- (A) Sell to Michael Dell and Silver Lake for $13.75 per share;2 or
- (B) Don't do that, and instead do the thing - putter along as a public company and maybe do Carl Icahn's cockamamie tender-offer recap - that they thought was in the worst interests of shareholders.
And they chose option (B)! I mean, not in so many words, there's a bunch of fuffling around about how the "new record date would enable the many shareholders who bought their shares after June 3, 2013 to vote on the transaction while giving all shareholders more time to reflect on where their best interests lie in light of the improved offer," which is a sentence that you should really read in your best Fat Tony voice. Also the board still seems interested in changing the voting standard in exchange for a bit more money, so maybe they'll get that. Also a lot can go wrong with Dell between now and September; you could imagine the board rooting for "things get worse enough to convince shareholders to sell but not so bad that it's a MAC." Which seems to have been the strategy so far? Anyway. Maybe the horse will talk.
But of course Silver Lake can turn them down, let Friday's vote on $13.65 a share proceed and fail, and walk away from the deal rather than upping their bid to $13.75-that-might-become-$14-in-September-when-the-vote-is-still-looking-shaky. Silver Lake offered to raise their price in exchange for a voting standard that they'd win, not to just try this thing again in September. At least one anonymous person thinks that "Unless the voting standard changes, this is the end of the road for the deal."
If that's what happens, you'd think it would be pretty hard for the board to look themselves in the mirror. They've been prettyadamant about how crap they think Dell is as an independent public company, and how they think that the best path for shareholders is to take the money and get out. And now they have the opportunity to deliver exactly that to shareholders. And they're saying no because ... because they really value process?3 Because they're very solicitous of the opinion of the minority of shareholders voting no? Because they've quietly changed their minds about what's in the best interests of shareholders? Or just because they're conducting a very aggressive negotiation to get that last quarter of price out of the buyout group?
I dunno. But it's weird to see the board not having the courage of its convictions. They told shareholders that they should sell for $13.65. Now they have the opportunity to sell for $13.75, and they're turning it down because they don't have quite enough cover from shareholders who agree with them. If they end up, next week or in September, without the deal that they thought was best for shareholders and could have taken, how will that look?
Dell Special Committee Responds to Revised Proposal from Michael Dell and Silver Lake [BusinessWire]
Dell buyout consortium sees deal collapsing [Reuters]
Dell rejects revised bid, but with a giant escape clause [Fortune]
Dell Offers to Move Vote on Takeover, but Refuses to Bend on Voting Rules [DealBook]
1.Actually that's been my assumption - there's no reason to change the non-mandatory majority-of-the-minority voting rules if you don't have the absolute majority of the total shares required by law - though it's not quite clear that it's true. Here, using DealBook's most recent numbers and Michael Dell's 273mm-ish shares:
It'll be annoying if they change the voting rules and they can't even get a majority of the total shares.
2.You might have missed it but that "7" is in italics because it's even better than the thing they thought was in the best interests of shareholders. Whole extra ten cents.
3.Probably beyond the value that courts place on it. This is pretty squishy but basically everyone seems to agree with Michael Dell that "changing the standard to allow a majority of the unaffiliated shares voting on the transaction to control the outcome, and to prevent a minority of the unaffiliated shares voting on the transaction from defeating the will of the majority, will not expose board members to any liability or increased judicial scrutiny." (See, e.g.)