Dell Inc. headquarters. File photo.
AP Business Writers
ROUND ROCK (AP) — Dell has delayed Thursday’s vote on founder Michael Dell’s plan to take the slumping computer maker private in a sign the board needs more time to rally support.
Dell called a special shareholders meeting to order, then quickly adjourned it without a formal vote of the $24.4 billion buyout offer from Michael Dell and a group led by investment firm Silver Lake. It was rescheduled for July 24 at the company’s headquarters in Round Rock, Texas.
The postponement is a significant setback for Michael Dell and the company’s board, which has spent the past five months trying to persuade shareholders to approve the buyout proposal. Supporters believe Dell Inc. stands a better chance of turning around if it can make long-term strategic decisions without worrying about meeting Wall Street’s quarter-to-quarter expectations.
The mounting opposition to the deal is likely to increase the pressure on Michael Dell and Silver Lake to sweeten their offer. Dell’s stock rose 29 cents, or 2.3 percent, to $13.17 in midday trading after the delay was announced.
It’s unclear whether Silver Lake and other lenders financing the bid will be willing to raise the stakes, given a deepening slump in the PC market that has been causing Dell’s earnings to crumble. PC sales have been falling as people delay replacing traditional computers and spend their money instead on the latest smartphones and tablets. Tablets are expected to outsell laptops this year.
Michael Dell, who is Dell’s CEO, is hoping to evolve the company into a more diversified seller of technology services, business software and high-end computers — much the way IBM Corp. had successfully transformed itself in the 1990s.
The delay is a vindication for two major Dell shareholders, Carl Icahn and the Southeastern Asset Management fund. They own a combined 13 percent of Dell and have been leading the mutiny against the proposed deal. They have argued the price undervalues Dell’s long-term prospects, giving Michael Dell and his backers an unfair opportunity to profit from a turnaround.
Many shareholders voted by proxy ahead of time, giving the company an indication of the results had the vote been formally recorded Thursday. In a statement, Dell said the delay was done to give the board more time to solicit votes.
The statement didn’t say anything about the tally so far, but the delay suggests Dell didn’t have the votes needed to approve the board-backed plan. In a statement, Icahn and Southeastern Asset said the delay “reflects the unhappiness of Dell stockholders with the Michael Dell/Silver Lake offer.”
Because of an agreement that Michael Dell wouldn’t cast his shares, which represent about 16 percent of the company’s stock, the board needs slightly more than 42 percent of Dell’s outstanding stock to accept Michael Dell’s offer to get the deal done. Shareholders representing at least 20 percent of the votes were known to be in opposition. The delay allows the board to sway some of those shareholders and to get votes from those who hadn’t submitted proxies.
Joe Whitlock, a 25-year shareholder who said his stake “isn’t enough to make a difference” in the outcome, did not vote Thursday. Although his stockbroker had advised him to support the buyout, he began to have second thoughts and said the $13.65 per share being offered “is undervalued for the stock.”
Michael Dell was present, but did not address the meeting. Company officials said he would have no comment