Dell Inc. shareholders are again poised to help decide the fate of the computer maker in a shareholder vote Wednesday evening at the company’s Round Rock headquarters.
But whether or not founder and CEO Michael Dell has enough votes to support his plan to take the computer maker private is anyone’s guess.
Last week, shareholders met to consider a $24.4 billion buyout offer by Michael Dell and his financial ally, Silver Lake Partners. But just minutes after the meeting was convened, members of the special committee to the board of directors moved to postpone the vote and adjourn.
The adjournment was to give Michael Dell more time to solicit votes from proxy shareholders, officials said at the time. Analysts later said the delay was an indicator that the CEO’s bid didn’t have enough support to win approval.
Has the ensuing week made a difference?
Michael Dell hasn’t upped the offer price of $13.65 a share, and there have been reports that even some of the company’s smaller shareholders have been getting calls seeking their support for the buyout.
Analysts and observers agree on this: Nobody really knows what will happen, and the vote — if it is taken — will be tight.
“I think it’s going to be close,” said Jim Nolen, an Austin investment adviser and retired senior lecturer in finance at the University of Texas. “If (Dell) didn’t sweeten the pot any then maybe they think they got enough votes in this week’s time to put them over the top.”
Michael Dell 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. successfully transformed itself in the 1990s.
His supporters say the company stands a better chance of turning around if it can operate as a private company — allowing it to make long-term strategic decisions without worrying about meeting Wall Street’s quarter-to-quarter expectations.
But there has been significant opposition to the Michael Dell-led offer. Two major investors, billionaire activist Carl Icahn and Southeastern Asset Management Inc. of Memphis, are leading the effort to defeat the buyout. Icahn and Southeastern together own about 12.5 percent of Dell Inc.’s stock, making them the largest outside investors.
Other major investors, including T. Rowe Price Group, have also said that they intend to vote against the buyout.
On Tuesday, Icahn urged the Dell Inc. board’s special committee to hold the shareholder vote Wednesday as scheduled, and to avoid another delay.
“We think that –- after six months –- the time for soliciting is over,” Icahn and two Southeastern executives wrote in a letter to the committee. “It’s time to vote. Do not move election day again. This is not a banana republic.”
In the open letter, also signed by Southeastern’s Mason Hawkins and Staley Cates, Icahn called the actions of Dell Inc.’s board “unconscionable” and accused Michael Dell of employing “scare tactics” to obtain shareholder votes.
Dell officials said the company had no response to Icahn’s letter. Icahn and representatives from Southeastern did not return calls for comment Tuesday.
Another option, should Wednesday’s vote not go Michael Dell’s way, is for him to put forth a tender offer for outstanding shares and try to purchase a majority stake in the company.
A tender offer “makes Icahn put his money where his mouth is. It makes him basically have to pony up for every share that he wants,” said Roger Kay, an analyst with Endpoint Technologies Associates.
If Michael Dell gained control through a tender offer, then the company would remain public, but the CEO could prevent Icahn from placing his own board members within the company, Kay said.
“And so the idea is to maintain control of governance and not let Icahn make his next move, which would be a proxy fight to install his own directors,” Kay said.
Kay said he doesn’t think Michael Dell and Silver Lake will raise their $13.65 per share buyout offer.
But analyst Patrick Moorhead disagreed, saying he thinks the buyout will be approved Wednesday, but with a sweetened offer by Michael Dell “in one way or another to push the deal through.”
“This is a wise move, because the vote won’t go through without it,” said Moorhead, of Moor Insights & Strategy.
Part of Michael Dell’s challenge in winning approval for the deal is that he and other senior company executives cannot have their shares — roughly 16 percent of the company’s total — counted in the buyout vote.
Recusing those shares from the vote was a good-faith effort on Michael Dell’s part to “show he was doing the right thing,” Kay said. But it could come back to haunt him.
“He did it for the right reasons, and his thanks for that is to get screwed by these other guys,” Kay said.
The board needs slightly more than 42 percent of the company’s outstanding stock to accept Michael Dell’s offer.
Chances are slim that the buyout can succeed without yes votes from Icahn, Southeastern and T. Rowe Price, which together hold about 16 percent of the company’s shares, according to an analysis for The New York Times by Rotary Gallop, which uses statistical methods to model shareholder voting outcomes.
“If and when the deal passes a shareholder vote it will be because one or all of them voted for it,” Radhika Dirks, Rotary Gallop’s managing partner, told The New York Times.
Together, those three investors cast the swing vote in 83 percent of possible voting situations, Rotary Gallop said. But the buyout’s chance of succeeding is even lower than that number implies — just 8.6 percent, thanks to a small number of theoretically possible situations under which the buyout fails regardless of the trio’s vote.
Should the deal fall through, Dell Inc.’s stock price could drop substantially, said analyst Ashok Kumar with Maxim Group. Dell Inc.’s stock closed at $12.88 on Tuesday, and a no vote on the buyout offer could send the price below $10 a share, Kumar said.
Kumar predicted that Wednesday’s meeting will be a “nail-biter.”
“It’s a classic situation for shareholders — you have a bird in the hand,” he said.
Go to statesman.com and mystatesman.com for live updates as the Dell Inc. shareholder meeting unfolds. The meeting is scheduled to begin at 5 p.m. Wednesday.