Asa Mathat | D: All Things Digital
Michael Dell made what reads like his final appeal to shareholders of the computing company that bears his name, seeking their approval of a $24.6 billion leveraged buyout he has proposed with the private equity firm Silver Lake.
“The decision is now yours. I am at peace either way and I will honor your decision,” Dell wrote in an open letter filed with the U.S. Securities and Exchange Commission early this morning.
The letter came after a day of significant developments in the ongoing drama surrounding the fate of what was once the world’s largest supplier of personal computers. Dell and Silver Lake raised their bid by a dime to $13.75 a share in the hope of convincing the company’s board to change some of the rules governing the shareholder vote. Naturally, that didn’t sit well with Carl Icahn, the activist investor stalking the company with a competing shareholder proposal of his own. He resorted to writing verse on Twitter to make his case.
Without mentioning him by name, Dell criticized some of the proposals floated by Icahn, including the sale of assets and a leveraged recapitalization, saying they would be “destructive to the company.” Should the buyout be rejected by shareholders, he said he won’t support any of Icahn’s proposals. Dell remains the company’s largest single shareholder, with about 14 percent to 15 percent of the shares outstanding.
Dell also reiterated the case he and Silver Lake made in a joint letter yesterday, saying the “non-vote-equals-no-vote” provision of the shareholder vote process is unfair. “Currently, over 25 percent of the unaffiliated shares have not voted,” he wrote. “This means that even if a majority of the unaffiliated shares that vote on the transaction want to accept our offer, the will of the majority may be defeated by the shares that do not vote. I think this is clearly unfair.”
The special committee of Dell’s board hasn’t yet formally responded to the latest offer.
Dell’s full letter is below:
Dear Fellow Shareholders,
You have undoubtedly read many stories about our efforts to take Dell private. I wanted you to hear directly from me.
I believe that taking Dell private is the right thing to do for the company. We need to transform, and we need to do it quickly. The transformation is not without risks and challenges, and I believe that we can do what we need to do better as a private company than a public company.
When I came to the Dell board last August to ask if the board would consider the possibility of a going private transaction, I understood that the independent directors would control the process, and I made clear that I was ready to partner with whoever would pay the highest price. I encouraged every interested party to pay the highest price they could.
After one of the most thorough processes in history, the highest price that any of the parties was willing to pay was $13.65 per share. Although no other party has offered to pay more than $13.65 per share, Silver Lake and I have now increased our offer to $13.75 per share, an increase to public shareholders of approximately $150 million, which is our best and final offer.
I believe this offer is in the best interests of the company and our shareholders. Certain other parties have been proposing alternatives such as leveraged recapitalizations, sales of assets and other steps that I believe would be destructive to the company and that I do not and will not support.
The decision is now yours. I am at peace either way and I will honor your decision. Our agreement requires the vote of a majority of the unaffiliated shares – your shares – to approve the transaction. Unfortunately, our agreement also provides that shares that do not vote count as votes against the transaction.
Currently, over 25 percent of the unaffiliated shares have not voted. This means that even if a majority of the unaffiliated shares that vote on the transaction want to accept our offer, the will of the majority may be defeated by the shares that do not vote. I think this is clearly unfair.
When we offered to increase our bid to $13.75 per share, we also asked the Special Committee of the Board to change this unfair vote standard and allow the will of the majority of the unaffiliated shares that vote on the transaction to control the outcome.
Particularly given the efforts of others to promote alternative transactions, and the ability of those parties to vote their shares when my shares do not count, it makes no sense whatsoever to skew the playing field even further by counting shares not voting as if they supported the opposition group.
If the Special Committee agrees to our increased bid of $13.75 per share, and agrees to create a fair and level playing field in which you can decide, I will look forward to your decision.
Michael S. Dell