Dell strikes down shareholder vote proposal for buyout

Dell's Special Committee is willing to put new offer of $13.75 per share to a vote under current voting rules, however

Dell's board has struck down new shareholder voting guidelines for a buyout proposed by company founder Michael Dell and his associates, Silver Lake Partners, which are in a fight with investor Carl Icahn to take the PC maker private.

Dell and Silver Lake have offered shareholders US$13.75 per share to buy the company, an increase from the $13.65 proposed in February. The new offer was subject to a change in shareholder voting rules so that only "yes" or "no" votes would be counted, with abstentions and non-votes being left out. Voting rules in place now call for abstentions to be counted as "no" votes for the buyout.

Dell's Special Committee, which is reviewing proposals to buy out the company, provided no specific reason for declining the new shareholder voting proposal. But in a letter to Dell and affiliated parties on Wednesday, the Committee said it is prepared to proceed either with a shareholder vote Friday on Dell-Silver Lake's previous $13.65 buyout proposal, or a vote on the new $13.75 offer at a later date. Either vote would have to be under the current voting guidelines, the committee said.

Right now the shareholder voting date -- which has already been delayed twice -- is scheduled for August 2 at 9:00 a.m. Central Time.

The Committee's rejection of the change in voting rules is bad news for CEO Michael Dell, who analysts said failed to get enough shareholder backing to take the company private at $13.65 per share. Major shareholders have come out against the original proposal, and the increase of $0.10 per share might not change their stance, analysts said.

The stand by the Special Committee is also a win for Carl Icahn, who has made a counteroffer to buy out Dell and came out earlier this week against Dell's proposed shareholder voting rule changes.

"The plain and simple fact is that Michael Dell and Silver Lake have underestimated the extent of stockholder opposition to the Michael Dell/Silver Lake transaction and are unwilling to pay fair value to obtain approval of their interested-party freeze-out transaction," Icahn wrote in a statement earlier this week.

But Michael Dell has said that $13.75 per share is his final offer, and he won't budge from that amount. The only other offer to buy out the company is from Icahn and shareholder Southeastern Asset Management, who believe their deal is potentially worth $15.50 to $18 a share for current shareholders. The deal would involve tapping into the debt market and recapitalization of the company, but the Special Committee has raised concerns about Icahn's proposal.

Dell's Special Committee is now waiting for a response from Michael Dell and Silver Lake, which will determine the next steps in the proposed offer and shareholder vote.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com

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