Silver Lake Partners, Michael Dell and Dell’s special committee finally agree on something.
In exchange for a higher offer price for the acquisition of Dell, the company’s board special committee has agreed to change shareholder voting rules that make the deal more likely to gain approval. A shareholder vote is now scheduled to proceed on 12 September.
On Friday, which was the second revised date scheduled for a shareholder vote on Silver Lake’s and Michael Dell’s bid for the company, the board special committee agreed on new terms for the take-private deal, including an increase in the pair’s offer price by at least $350 million and up to $470 million, according to a statement from Dell’s special committee.
Silver Lake declined to comment.
Silver Lake’s and Michael Dell’s offer will be increased to $13.75 per share, from the $13.65 previously discussed. On top of the 10 cent increase is a special dividend payment of 13 cents per share, according to the statement. The 13 cents will be financed by Michael Dell personally, according to CNBC. Michael Dell’s MSD Capital was unavailable for comment at press time.
The regular quarterly dividend of 8 cents per share also will be paid in October for the third quarter, before the deal closes, according to the statement.
The third quarter dividend that increases the offer by an additional $120 million would not have been paid if the merger agreement was finalised before October; however, a new date has been set for the vote. After two previous delays, the shareholder vote will now take place on 12 September.
The Dell Company scheduled the annual shareholder meeting for 17 October, on Friday. But almost immediately after, shareholder Carl Icahn issued a statement, not only calling the new merger agreement terms “a slap in the face', but also requesting the annual shareholder meeting take place on the same day as the vote.
On Thursday Icahn sued the Dell Company to stop changing the voting rules, but Silver Lake, Michael Dell and the special committee revised the standards anyway. The vote will now be based on shares that actually vote, instead of all outstanding shares that are not affiliated with Silver Lake’s and Michael Dell’s offer.
“The additional value in the deal came in exchange for a revised voting standard,” a source familiar with the situation told Private Equity International.
The Dell special committee is in favour of the new voting standard because “it provides a level playing field”, said Alex Mandl, the committee’s chairman in the statement.
The committee also has plans to change the record date. Previously, shareholders who purchased Dell stock before 3 June were eligible to vote. In an effort to increase voter turnout, shareholders who buy stock before 13 August will be eligible to vote, the statement disclosed.
Dell’s special committee stressed its desire for all shareholders “to have ample opportunity to vote for or against the transaction”, Mandl said in the statement. “We urge all shareholders to support this transaction.”
Finally, Silver Lake, Michael Dell and the special committee agreed to a reduction in the break-up fee that Silver Lake and Michael Dell would collect if the committee terminates the merger agreement and chooses an alternative deal. The break-up fee has been lowered to $180 million from $450 million, according to the statement.
“It is very likely this deal is going to get done; if it doesn’t this lowers any barriers to an alternative deal that other shareholders might want,” a source familiar with the acquisition told PEI.”That’s another slight adjustment to the agreement that can be construed as shareholder-friendly.”
The revisions to private equity mega-firm Silver Lake’s and tech-giant founder Michael Dell’s buyout offer follow an ongoing series of proposals. The saga began in February, when other private equity players were in the mix, and then Icahn submitted five proposals. But during the past few months Silver Lake and Michael Dell have been the main bidders.Their original offer for $13.65 per share was increased to $13.75 last week, provided the special committee change the shareholder voting rules. But after the committee declined what the pair called their “best and final offer”, the latest terms were agreed to on Friday.