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Dell’s Sweetener Isn’t Sweet Enough

In a letter to Michael Dell & Silver Lake the special committee offered to change the date establishing who was eligible to vote

The Dell board's special committee has rejected Michael Dell and Silver Lake Partners offer to pay $13.75 a share for the company in exchange for not counting shares that don't vote one way or the other on the buy-out as being against it.

In a letter to Michael Dell and Silver Lake made public in an SEC filing Wednesday, the special committee offered to change the date establishing who was eligible to vote at all if Michael Dell and Silver Lake were still willing to pay $13.75. Otherwise it's planning on tabulating the vote on Friday on the original terms of $13.65 a share that the board accepted back in February.

The committee did not say why exactly it was refusing to change the voting rules originally agreed to but it doubtless has something to do with an abundance of caution about lawsuits.

It can only be speculated what the committee would have done if Michael Dell and Silver Lake hit the magic number of $14 a share that it was reportedly angling for.

As it stands now, however, it is widely believed that Michael Dell and Silver Lake don't have the votes needed to win no matter what the record date of eligible voters is.

If the buy-out goes down to defeat, the opposition party led by activist shareholder Carl Icahn will have cleared its first hurdle and will focus on the promised proxy fight to unseat the board, oust Michael Dell as CEO and ram through a counter-proposal to enrich the shareholders but leave the company in potentially dicey straits.

In that case, Michael Dell can vote his shares against Icahn but may wind up with a mixed board.

The latest news about the number of abstentions, which is now days old, is that 27% of the voting stock hasn't voted. That could be because the stock was long since sold, or because sovereign wealth funds and brokerage accounts don't usually vote on proxy matters or because - in the case of retail investors - they simply don't know.

Icahn maintains that the passive-aggressive vote is really against the buy-out. The naysayers just need a 43% majority to prevail.

In what is believed to be the unlikely event Michael Dell and Silver Lake accept the committee's proposal and agree to change the eligibility date to include stock bought after June 3 there couldn't be a vote until after a new merger agreement is filed and a new record date set.

According to a Dow Jones source, it "would probably be at least three weeks after the new record date," which in turn upsets the calendar for an annual stockholder meeting, which is supposed to be held by mid-August.

Icahn, of course, is against changing the record date and is already agitating for the stockholders meeting where his proxy fight plans can unfold.

Anyway, here's the letter signed by the head of the special committee that was sent to Michael Dell and Silver Lake's Egon Durban on Tuesday:

Dear Mr. Dell and Mr. Durban:

The Special Committee has carefully reviewed your letter of July 23, 2013, in which you propose to increase your offer to $13.75 from $13.65 per share subject to the Committee agreeing to change the voting standard such that non-voting shares are no longer the functional equivalent of no votes in determining the majority of disinterested shares.

The Committee is not prepared to accept your proposal. We are, however, willing to establish a new record date for a vote on a $13.75 per share transaction under the existing voting standard. A new record date would enable the many shareholders who bought their shares after June 3, 2013 to vote on the transaction while giving all shareholders more time to reflect on where their best interests lie in light of the improved offer.

In the alternative, we are prepared to proceed with a vote on the existing $13.65 per share transaction at the Special Meeting to be reconvened on August 2, 2013 at 9:00 a.m. Central Time.

We look forward to your response.

Sincerely,

THE SPECIAL COMMITTEE OF THE
BOARD OF DIRECTORS OF DELL INC.
Alex J. Mandl

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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