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Dell rejects revised bid, but with a giant escape clause

July 31, 2013: 9:34 AM ET

michael_dellDell makes its founder an offer he probably can't refuse.

FORTUNE -- Michael Dell and Carl Icahn finally have something in common: They are annoyed with Dell Inc.'s special committee.

Dell's (DELL) special committee this morning rejected a new buyout proposal from Michael Dell and private equity firm Silver Lake, which would have raised their offer from $13.65 per share to $13.75 per share in exchange for a voting rules change that would have excluded all abstentions (they currently count as "no" votes). Instead, the special committee said that the prospective buyers have two options:

1. Proceed with the shareholder vote this Friday at $13.65 per share, or

2. Establish a new shareholder record date on a vote at $13.75 per share.

What's particularly interesting here is that Dell's special committee does not seem to have any legal or moralistic reason for maintaining the non-vote rule. In fact, there have been published reports that they would gladly scrap it in exchange for a bid of $14 per share or higher. So this strategy seems like a way to squeeze a bit more money out of Michael Dell, who has plenty of cash but is constrained by Silver Lake's reluctance (which matters, since they essentially control the leveraged financing).

At the same time, the special committee likely believes the second option is an olive branch to Michael Dell -- and a way to sidestep Carl Icahn. No one knows the current composition of Dell's shareholder base, but high volume in recent weeks suggests that there is a larger percentage today with a cost basis below $13.75 per share -- or below $13.65, for that matter -- than there was on June 3. As such, a change to the record date may allow Michael Dell to get across the finish line even without the voting rules change, albeit several weeks or even a month later (since the proxy process would begin anew). Carl Icahn likely would complain that this is Dell's special committee changing the rules to benefit the company's founder, although it's difficult to gain much sympathy for a position that would deny current shareholders the right to vote on the company's fate.

No official word yet on which path Michael Dell and Silver Lake plan to choose. I would assume it's the second, since it should give them the best chance of success. The only caveat is that Michael Dell referred to $13.75 plus voting changes as his "best and final" offer, meaning that he'd be going back on his word a bit by accepting the record date change. And perhaps that is the game that Dell's special committee really is playing:

"Hey Michael: Since you already were willing to amend your 'best and final offer' in terms of conditions, perhaps you'll be willing to make one more change? Say, an extra quarter per share?"

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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