Michael Dell faces possible setbacks in buyout

Jul 04, 2013
<p>ISS may recommend against buyout, while Silver Lake reconsiders support, Bloomberg reports</p>

Proxy advisory firm ISS is likely to recommend shareholders in computer maker Dell reject a takeover bid by the company’s founder, according to media reports.

ISS is leaning toward a recommendation against the founder’s bid, which has been the subject of a proxy battle with activist investor Carl Icahn, and may issue it before the July 18 annual shareholder meeting, according to Bloomberg News, which cites unidentified people with knowledge of the matter.

Meanwhile, Silver Lake, which has been founder Michael Dell’s staunchest partner and financial backer in his bid to take the company private, is reconsidering its position, Bloomberg News reports, also citing unidentified people close to the issue.

An ISS recommendation against the buyout attempt in addition to a withdrawal by Silver would represent serious setbacks for the deal and boost Icahn’s chances of keeping the company public.

The news comes after the Dell board of directors, which encouraged shareholders to reject the bid by Icahn, called on Michael Dell and Silver Lake to raise their buyout offer of $13.65 a share, according to the unidentified sources. The bidders have not yet responded to the board’s suggestion, the sources say.

Icahn last month told investors the company would offer them $14 per share if they helped him foil the founder’s plan for a going-private transaction and name his candidates to the board of directors at this month’s shareholder meeting.

Icahn has said the company can increase profitability through a series of measures and benefit existing shareholders more if it doesn’t go private. A Dell board committee of independent directors last week rejected Icahn’s offer as ‘unrealistic’ and said his proposal faces a shortfall of $2.9 bn.

Michael Dell has said he wants to take the company he founded private because it faces too much competition in the PC manufacturing market and needs the agility of private management to increase its profitability in the future.

Dell’s committee of independent directors last week said the company’s market share, which has fallen to 11.1 percent in 2013 from 15 percent in 2008, will likely decline further as ‘Asian vendors are becoming increasingly aggressive, competing with operating margins in the low single digits.’ The directors also cite growing competition from mobile devices and other areas as a factor in the stock’s decline.

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