Choices: Closer look at 2 plans for Dell's future

Jul 18, 2013 by The Associated Press
In this Aug. 15, 2011 photo, the logo on a Dell computer is displayed, in Philadelphia. Dell Inc. is making a late push to win shareholder support for founder Michael Dell's plan to take the slumping computer maker private, an indication that the scheduled vote, Thursday, July 18, 2013, could be close. Supporters of the $24.4 billion buyout believe Dell Inc. stands a better chance of turning around if it can make long-term strategic decisions without worrying about meeting Wall Street's quarter-to-quarter expectations. (AP Photo/Matt Rourke)

Dell Inc. has delayed Thursday's vote on founder Michael Dell's plan to take the computer maker private. That's a sign the board needs more time to rally support. Activist investor Carl Icahn and the Southeastern Asset Management fund, which own 13 percent of the company combined, have made a competing proposal.

Here's a closer look at the two plans:

MICHAEL DELL/SILVER LAKE

About the offer: The $24.4 billion buyout offer, at $13.65 per share, would take the company private. Michael Dell, the CEO and the largest shareholder, is throwing in all of his stock and $750 million of his $15 billion fortune to help finance the sale to a group led by investment firm Silver Lake. Dell's stock-and-cash contributions to the deal are valued at about $4.5 billion. The plan calls for paying for most of this through loans, including $2 billion from longtime Dell partner Microsoft Corp.

If it succeeds: Michael Dell is hoping to evolve the company into a more diversified seller of technology services, business software and high-end computers—much the way IBM Corp. had successfully transformed itself in the 1990s. He believes he has a better chance of turning the company around in the long run if it didn't have to worry about Wall Street's quarter-to-quarter expectations.

Criticisms: Some big investors have signaled opposition to the bid. Icahn believes the offer undervalues the company's long-term prospects and gives Michael Dell and his backers an unfair opportunity to profit from a turnaround. The deal would saddle Dell with more than $15 billion in debt, which could raise doubts about its among its risk-averse corporate customers.

In this Wednesday, Nov. 14, 2007 file photo, Dell CEO Michael Dell smiles at Oracle Open World conference in San Francisco. Dell Inc. is making a late push to win shareholder support for founder Michael Dell's plan to take the slumping computer maker private, an indication that the scheduled vote, Thursday, July 18, 2013, could be close. Supporters of the $24.4 billion buyout believe Dell Inc. stands a better chance of turning around if it can make long-term strategic decisions without worrying about meeting Wall Street's quarter-to-quarter expectations. (AP Photo/Paul Sakuma, File)

The status: The plan has the backing of Dell's board. Because of an agreement that Michael Dell wouldn't cast his shares, which represent about 16 percent of the company's stock, the board needs the support of slightly more than 42 percent of Dell's outstanding stock. Shareholders representing at least 20 percent of the votes were known to be in opposition. Although the company hasn't disclosed the current vote tally, the delay in formally recording the vote suggests it is short of what's needed.

The vote has been rescheduled for next Wednesday at a meeting to take place at 6 p.m. EDT (2200 GMT) at the company's headquarters in Round Rock, Texas. The vote is open to shareholders of record on June 3, the same as before. With the delay, the board can try to sway some of the opposing shareholders, possibly if the group sweetens its bid. It can also try to get votes from those who hadn't cast votes by Thursday's meeting.

CARL ICAHN/SOUTHEASTERN ASSET MANAGEMENT

About the offer: Icahn and Southeastern Asset have proposed that the company buy back 1.1 billion shares at $14 each. They added another element last week that would give stockholders warrants to buy additional shares. Icahn has valued his plan at $15.50 to $18 per share. That plan calls for rewarding shareholders with some cash now, but leaving about a third of the shares outstanding for shareholders to benefit from a successful turnaround.

If it succeeds: Icahn and Southeastern want to replace the Dell board with their own slate of candidates and put their plan in effect. Icahn plans to oust Michael Dell as CEO, but hasn't said whom he has in mind to run the company.

Criticisms: A special committee of Dell's board calls the plan risky and short on details. One shareholder-advisory firm, Glass, Lewis & Co., says the certainty of a cash payout under the Michael Dell plan is better than the risk in continuing to hold Dell shares.

The status: No vote has been scheduled. Instead, Icahn would have to replace enough board members with his own candidates at Dell's annual shareholders meeting, which hasn't been scheduled yet.

Explore further: Icahn and Southeastern push against Dell buyout

not rated yet
add to favorites email to friend print save as pdf

Related Stories

Icahn and Southeastern push against Dell buyout

Jun 06, 2013

Activist investor Carl Icahn and Southeastern Asset Management Inc. are formally urging Dell shareholders to reject a buyout offer from the struggling PC maker's founder and investment firm Silver Lake Partners.

Dell: Investors offer short by $3.9B

Jun 05, 2013

Dell says a buyout offer from shareholder Southeastern and billionaire investor Carl Icahn is about $3.9 billion short of the amount needed to pay shareholders as promised and operate the business.

Dell board committee seeks info on investor plan

May 13, 2013

Dell board members say they need more details from investor Carl Icahn if he wants them to seriously consider his latest challenge to Michael Dell's $24.4 billion plan to take the computer maker private.

Icahn boosts offer for Dell

Jul 12, 2013

Corporate raider Carl Icahn and his allies boosted their offer for troubled US computer giant Dell, and repeated their call for shareholders to reject a $24.4 billion private equity buyout.

Icahn backs sweeter Dell counterproposal

Jul 14, 2013

Billionaire investor Carl Icahn is proposing that Dell shareholders get a chance to own a bigger stake in the struggling computer maker in hopes of thwarting an attempt by the company's founder to buy it for $24.4 billion ...

Recommended for you

Ex-Apple chief plans mobile phone for India

1 hour ago

Former Apple chief executive John Sculley, whose marketing skills helped bring the personal computer to desktops worldwide, says he plans to launch a mobile phone in India to exploit its still largely untapped ...

Airbnb rental site raises $450 mn

14 hours ago

Online lodging listings website Airbnb inked a $450 million funding deal with investors led by TPG, a source close to the matter said Friday.

US venture investments highest since 2001 (Update)

Apr 18, 2014

Funding for U.S. startup companies soared 57 percent in the first quarter to a level not seen since 2001, as venture capitalists piled more money into a growing number of deals, according to a report due out Friday.

User comments : 0

More news stories

Ex-Apple chief plans mobile phone for India

Former Apple chief executive John Sculley, whose marketing skills helped bring the personal computer to desktops worldwide, says he plans to launch a mobile phone in India to exploit its still largely untapped ...

Airbnb rental site raises $450 mn

Online lodging listings website Airbnb inked a $450 million funding deal with investors led by TPG, a source close to the matter said Friday.

Health care site flagged in Heartbleed review

People with accounts on the enrollment website for President Barack Obama's signature health care law are being told to change their passwords following an administration-wide review of the government's vulnerability to the ...

NASA's space station Robonaut finally getting legs

Robonaut, the first out-of-this-world humanoid, is finally getting its space legs. For three years, Robonaut has had to manage from the waist up. This new pair of legs means the experimental robot—now stuck ...

Filipino tests negative for Middle East virus

A Filipino nurse who tested positive for the Middle East virus has been found free of infection in a subsequent examination after he returned home, Philippine health officials said Saturday.

Egypt archaeologists find ancient writer's tomb

Egypt's minister of antiquities says a team of Spanish archaeologists has discovered two tombs in the southern part of the country, one of them belonging to a writer and containing a trove of artifacts including reed pens ...