Dell's future hangs on looming shareholder vote

Dell founder Michael Dell, left, and Carl Icahn, right. Carl Icahn penned an open letter to Dell stockholders urging them to get shares appraised before approving Michael Dell's $2.4 billion plan to take the computer maker private. (Photo: Virginia Mayo Mark Lennihan, AP)

SAN FRANCISCO -- The fate of PC manufacturer Dell as a public company bidding to go private is near some kind of resolution.

Dell shareholders are scheduled to vote Thursday on a sale of the company to an investment group including founder and CEO Michael Dell. But last-minute offers and other efforts by critics of the deal could derail the shareholder meeting.

Founder and CEO Michael Dell and Silver Lake Partners investing partners are offering to take the company private for $13.65 per share, or $24.4 billion. But so far, billionaire investor Carl Icahn, a vocal critic of the offer, has refused to drop his counteroffer.

The outcome is far from certain, experts say. On Monday, brokerage and shareholder T Rowe Price voiced its opposition of the Dell offer. And at the urging of Icahn, some shareholders are grousing that the offer undervalues Dell, hinting that they may balk at the vote in hopes of getting CEO Dell and his group to sweeten the bid.

Icahn and Southeastern Asset Management partners have offered $14 a share in cash plus one warrant for every four shares tendered. The warrant would give shareholders the right to buy one Dell share for $20 over the next seven years. In a letter to shareholders, Icahn valued his counteroffer at about $15.50 to $18 a share. Both offers would add substantial debt to Dell's balance sheet and require loans from private equity firms or major customers.

On Tuesday, a special committee of Dell's board tasked with evaluating the offers declined to endorse Icahn's latest proposal as superior. The committee does not accept Icahn's financing terms, which are conditioned on replacing Dell's board with Icahn and 11 others who work for Icahn and Southeastern.

"We wish to note that it is unfortunate Mr. Icahn continues to conduct his campaign by trying to discredit the special committee and accuse it of frightening Dell stockholders," the committee said Tuesday in a statement.

Icahn and his partners own a 13% stake in Dell. Under the terms of the Dell offer, the founder cannot use his shares -- a 16% stake -- in the shareholder vote. That means he and his partners need 42% of shareholders to approve their offer.

Since shareholders don't need to commit until the voting begins, Dell might delay Thursday's meeting, some Dell watchers said, and offer to sweeten their bid to ensure getting enough votes for approval.

Struggling PC maker Dell, based in Round Rock, Tex., has fallen victim to shrinking PC sales globally and failed to ride the mobile computing wave of the past few years. The founder says his proposal to take the company private would give it time away from meeting investor demands for short-term profit and allow for a dramatic overhaul aimed at developing data centers, services and software in a bid for higher margins.

However, "there hasn't been a compelling case that the current business strategy is wrong and an alternative is superior," said Jay Ritter, a professor of finance at the University of Florida, of the contentious proposals.

Last week, proxy advice firm Institutional Shareholder Services and two other major firms in that industry endorsed the buyout offer from Dell, who founded the company in 1984, and Silver Lake. Ritter says "a bidding war would result in a much higher price," if shareholders don't approve the offer on the table Thursday.

Shares of Dell fell 1% Wednesday to close at $12.88. Founder and CEO Dell owns about 16% of the company's shares. Under the deal, he would relinquish his publicly traded shares and throw in $750 million in cash (of his $16 billion fortune) to contribute about $4.5 billion to the offer.