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Dell encouraged to raise bid

NYT/ AFR | July 5, 2013
Dell's directors have encouraged Michael Dell to raise the deal's offer price of $US13.65 a share if he wants to win the bid.

Crunching numbers ... Michael Dell.
Crunching numbers ... Michael Dell. Photo: AP

New York: Michael Dell may have to dig deeper into his pockets if he wants his $US24.4 billion bid for the computer company he founded to succeed.

A special committee of Dell's directors encouraged him over the weekend to raise the deal's offer price of $US13.65 a share, a person briefed on the matter said.

While Dell listened to the suggestion, he did not commit to a course of action. Furthermore, Dell and his private equity partner in the deal, Silver Lake, have not had any discussions about raising the current price, according to a person close to the firm.

Yet pressure is building on the buyout as two big Dell shareholders - Carl Icahn and the asset manager Southeastern Asset Management - continue to attack the deal with a shareholder vote drawing rapidly near.

The special committee is growing worried that the buyout offer will fail to win a majority of Dell shares that excludes Michael Dell's 16 per cent stake at the vote July 18, the person briefed on the matter said. Some 43 per cent of the Dell shares need to be voted in favour of the offer.

The directors have already taken a number of meetings with major investors that have left them pessimistic about the bid's prospects, and now believe that a major shareholder advisory firm is poised to recommend a rejection of the takeover.

Dell's offer, made in partnership with Silver Lake, has been criticised for months by a number of big outside investors.

But any bump in price would most likely come from the company founder, who already made concessions to reach the current price.

Silver Lake, which had refused to raise the bid beyond $US13.60 at one point, has become increasingly worried about the deterioration of Dell's business, a person close to the firm said. At the moment, it would not be devastated if the deal fell apart.

That has left Michael Dell - who agreed to contribute his 16 per cent stake in the company at a price of $US13.36 to leave more money for other shareholders - the most likely source of additional money. Yet any bump in price from Dell would still need the assent of Silver Lake, since that would affect the returns on its investment.

A representative for Michael Dell was not immediately available for comment.

The pressure on the current offer stems from the billionaire Icahn and Southeastern Asset Management. They are campaigning for an alternative plan: a huge share buyback that would pay investors $US14 a share and leave the company publicly traded.


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