In the much anticipated July 24 vote on Michael Dell's buyout plan that will make the world's third largest PC maker private ended with Icahn camp venting their anger on Michael Dell's continued reluctance in upping the offer price to $ 14 a share. While Dell sweetened the offer price to $13.75 per share - a sub 1% increase that failed to enthuse the naysayers. Moreover Dell did something unexpected- he demanded that voting rules be changed. What it means is any change in voting rules will favorable impact Dell and Silver Lake and supporters of this deal.
The Icahn camp wasted no time. In a statement issued by Icahn to Dell's shareholders stated that, "In today's latest installment of the "Desperate Dell Debacle," Michael Dell/Silver Lake have asked the Company to change the rules of the game in a transparent attempt to force their freeze out transaction across the finish line despite the vote of its stockholders. In a merger agreement with widely-criticized protective devices in favor of Michael Dell/Silver Lake and a sales process that included a number of advantages for Michael Dell/Silver Lake, the one stockholder protection was the requirement that a majority of the non-Michael Dell shares approve the deal.
The Special Committee has now been asked to GUT this provision to effectively render it meaningless. And, in return, Michael Dell/Silver Lake has offered to increase the deal price by$0.10, or 0.73%. More on Icahn's letter.
Where does it go from here?
So clearly opinions are divided at this point in time and Michael Dell's demand on changing the voting rules as per analysts only reflect the desperation and eagerness from the Dell camp to close this deal. With the next round of voting which is expected to happen in a week's time - it is going to be very very introspective phase for Dell's shareholders. Many things can happen and the two likely scenarios are:
Scenario 1: Michael Dell still commands great respect ( with at least a section of them) among Dell's shareholders and he is a known name in the industry and Icahn despite his billionaire status is often seen as a eccentric and how far he can bring in a top management overhaul is to be seen. He has called for the ouster of Michael Dell and his top managers and asking for shareholder support for the names his camp will be proposing. Given the uncertainties in the case of top management change, shareholders might go with Dell to insulate from the unknown.
Scenario 2: Dell has sweetened his offer for the sake of it, and it does not have any palpable impact on adding any significant value and Icahn has consistently said that the Dell has been undervalued in its present offer pricing. Clearly Dell shareholders badly want a turnaround and with sagging PC fortunes, they want Dell to carve a niche in the services space and become level playing with HP and IBM. But for that, Dell needs a bold new vision and the element of anti-incumbency might help Icahn tilting the tables in his favor.
Either ways, Dell might face severe business pressures in the coming quarters as most of the top management time is now engaged in closing the deal, and customers might go slow on new Dell engagements as they are not sure what will happen and who will steer Dell 2.0. And clearly it's the Catch 22 satiation at Dell right and hopefully in a week's time Dell's fate will be rewritten.