Dell Buyout Vote: 10 FAQs And Answers4:34 PM EST Fri. Aug. 02, 2013
From billionaire investor Carl Icahn suing Dell to Dell CEO Michael pushing to have a shareholder vote on his privatization bid postponed for a third time to Dell telling channel partners the legal wranglings are no big deal -- there are more twist and turns in the Dell shareholder vote than daytime soap opera. To help you keep things straight, here's a list of frequently asked questions and answers.
On Friday, Michael Dell and Silver Lake worked out an agreement with the Dell special committee to up the buyout price paid to Dell shareholders to $13.75 from $13.65 and added a special dividend of 13 cents per share.
The move comes on the heels of a lawsuit filed by Carl Icahn that attempted to keep the buyout vote on track for Aug. 2. Icahn also sued to prevent Dell from changing the shareholder record date -- the date shareholders must have owned shares to be eligible to vote. The record date was June 3, 2013, before it was changed Friday to Sept. 12. Icahn sued Thursday to make Feb. 5, 2013, the record date.
Including Friday, the vote has been postponed three times. The original shareholder vote was scheduled for July 18. Dell postponed the vote to July 24 to give stockholders additional time to submit their proxies.
The July 24 buyout was postponed to Aug. 2 when the Dell special committee overseeing the vote considered a new offer by Michael Dell and Silver Lake. CEO Dell offered to boost his offer by 10 cents per share -- from $13.65 to $13.75. The price increase, however, was contingent on the approval of new shareholder voting rules that would not count absentee votes as "no" votes.
Dell's special committee overseeing the shareholder vote rejected Michael Dell's offer on July 31.
Delaware law has one of the most business-friendly courts in the country. There are no hard-and-fast rules that would require Dell to ever hold a formal vote -- it's all governed by reasonable business practices. That means no vote is required, according to John Doggett business management expert and lecturer with the Department of Management, McCombs School of Business, at the University of Texas, "as long as the courts feel that the process is governed by reasonable business practices."
By law, Dell doesn't have to hold a vote; however, not doing so makes it hard for a court to say Dell is using reasonable business practices for the future success of Dell.
The short answer? More lawsuits.
Changing the voting rules to allow absentee votes not to be counted as "no" votes is a significant modification in voting rules. It will likely trigger a slew of lawsuits, said Doggett.
"That's a significant change in rules and Icahn and others have a legitimate point that this gives Michael Dell an unfair advantage," Doggett said.
Carl Icahn's lawsuit is more bark than bite, say experts. Icahn never stood a chance of forcing a vote for Friday, Doggett said. "Icahn's lawsuit was for public show to let people know he was serious and not going away quickly," he said.
Currently the buyout vote is set for Sept. 12. Vote delays could continue indefinitely, say experts, because there is no precedent in law in Delaware, where Dell is incorporated, requiring a company to hold a buyout vote.
However, companies are required by the Delaware Court of Chancery to hold annual stockholder meetings within 13 months of the previous meeting. Dell has set its annual meeting for Oct. 17. A buyout vote would be held at the annual meeting, if it hasn't taken place before then.
Michael Dell and Silver Lake might have won a battle against Carl Icahn moving the buyout vote from Aug. 2 to Sept. 12, but they are losing the war. Yes, Michael Dell now has more time to sway shareholder to his side. But, business experts say that with each buyout vote delay, Dell's future gets murkier, creating uncertainty among channel partners and companies.
For Michael Dell personally, the delays hurt his image as a business leader. Michael Dell went from being a 20-something "wunderkind that couldn't do anything wrong" to a 40-something struggling businessman that can't rally support to take the company that he founded private, Doggett said.
"There are going to be some significant downstream effects on [Dell] partners no matter what happens with the vote," said IDC analyst Crawford Del Prete told CRN in a July 25 interview. He said VARs should "pay attention to what happens in the next two weeks, because no matter what Dell is going to be a very different company in six months," he said.
"VARs need to have a plan 'B,'" Del Prete said. "If customers are asking a lot about Dell, you need to have an alternative enterprise hardware and software plan to start talking about."
At the CompTIA ChannelCon 2013, a VAR conference that was in Orlando, Fla., this past Wednesday, Greg Davis, vice president and general manager of Dell's Global Commercial Channel, attempted to ease concerns:
"Through this process we intend to continue the investments we have made over the last five years. We've got more people and we have more channel partner today than we did last year. We are investing in training and resources to continue to build our preferred and premiere partner base. We believe in the strategy of the company and our partners play a vital role in the company's future success."