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Silver Lake, Dell want voting rules change

Michael Dell and Silver Lake have proposed a change to shareholder voting regulations that would make gaining approval of their buyout offer easier.

The take-Dell-private saga, which has been ongoing for months, has been extended to at least 2 August after company owner Michael Dell and private equity firm, Silver Lake Partners, submitted an increased buyout offer Wednesday, according to statements from Dell’s Special Committee.

The buyout group boosted its offer price to $13.75 a share or $24.6 billion. The new offer price is 10 cents higher than the original offer of $13.65. Significantly, Dell and Silver Lake also have asked for a change in voting rules that would make it easier to gain shareholder support, according to statements from the board’s committee. The new rules would not count shareholders who don’t vote at all, as opposed to the current structure, in which absentee shareholders are counted as ‘no’ votes. Currently, 27 percent of Dell’s shareholders don’t plan to vote in the meeting, according to the statements. 

The special committee, which has not decided if it will accept the new proposal, and Silver Lake declined to comment. 

The price change represents a $150 million increase in consideration to be paid to unaffiliated stockholders, the statement disclosed. The offer is Michael Dell’s and Silver Lake’s “best and final proposal”, as written in the statements. It expires on the morning of 2 August, according to a statement released Wednesday afternoon by the buying group. The shareholder meeting to vote on Michael Dell’s and Silver Lake’s bid for the PC manufacturer was originally scheduled for 18 July and then rescheduled for Wednesday. 

A change in voting regulation months along in a deal process could be viewed as questionable corporate governance, a market source told Private Equity International Wednesday. “The request to change the voting rules is like moving the goal posts in the middle of the game,” the source said. 

US-based private equity firm Silver Lake has more than $23 billion in assets under management, according to its website. Its technology-focused investments include collective purchasing company Groupon and website host Go Daddy. In April, the firm closed its fourth fund, a 2012 vintage, on $10.3 billion, well above its $7.5 billion target, PEI reported. 

Dell: trying to change the rules

The majority of Silver Lake’s $1.4 billion equity contribution to the Dell deal will come from its third fund, which raised $9.3 billion in 2007, PEI wrote earlier. It is unclear whether Silver Lake’s contribution will increase if the new proposed merger agreement is accepted. 

Michael Dell and Silver Lake have been competing with Carl Icahn, chairman of Icahn enterprises. Icahn’s self-tender offer priced shares at $14 each and included warrants for future share purchases. According to documents from the special committee, the warrants made the future share price close to $20. Icahn made five different proposals to acquire the company, but statements made earlier this month revealed the committee’s concerns about Icahn’s offers.

“We believe it is critical that Dell shareholders not be distracted from the clear choice they must make next week — take $13.65 per share in cash or bear the risks of continuing to hold their Dell shares,” the special committee said in a statement, prior to the postponed meeting and increase in offer price. 

Earlier this month Institutional Shareholder Services, an independent proxy voting advisory firm, recommended that Dell shareholders vote for the $13.65 offer price, according to a statement from the special committee. It is unclear whether ISS would approve the $13.75 proposal, if presented to shareholders.

The Blackstone Group had previously bid for Dell, proposing an offer of $14.25 a share, PEI reported, but the proposal was withdrawn in April.