Michael Dell Ups His Offer, But There's A Catch

Michael Dell is now boosting his offer by 10 cents per share -- from $13.65 to $13.75 -- adding about $150 million to its leveraged buyout. The price increase, however, is contingent on the approval of new shareholder voting rules proposed by Michael Dell and equity firm Denali Holding.

In a letter to the Dell special committee, Michael Dell and Denali Holding said the increased offer hinges on agreement by the Dell board to change the way shareholder votes are counted. If the shareholder vote were held July 24, as originally planned, absentee votes would be considered "no" votes. The new proposal aims to change that, making any absentee votes (sometimes called "votes of abstention") not be counted as "no" votes. Instead, only votes cast directly by shareholders and by institutional investors would be counted.

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"This is our best and final proposal. We are not willing to discuss any further increase in the merger consideration nor are we willing to increase the merger consideration to $13.75 per share without the change to the Unaffiliated Stockholder Approval requirement," wrote Denali Holding in a letter to the Dell special committee.

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Dell partners, meanwhile, are still in wait-and-see mode. "I think Michael should do everything he can to prevail," said Michael Gavaghen, vice president of sales at SL Powers, a Boca Raton, Fla.-based solution provider and Dell partner. "As a channel partner I'm happy to see Dell fight."

According to a report from The New York Post Tuesday, 22 percent of Dell shareholders had not cast votes as of Tuesday. Michael Dell, who owns about 16 percent of Dell shares, cannot vote. The proposed new rules would give Michael Dell an important edge in his battle against billionaire investor Carl Icahn and his counteroffer.

Icahn, who owns 8.7 percent of Dell shares, blasted Dell Tuesday, calling a delayed vote an "unconscionable" move by the board. "How long can boards push out and change meeting dates and hide behind the 'business judgment rule'? The answer, my friend, is 'Blowin' in the Wind,' " Icahn wrote in an open letter to shareholders Tuesday.

Icahn and Southeastern Asset Management partners have offered $14 a share and thrown in a warrant provision allowing shareholders to buy one share of Dell for every four shares they owned for a fixed price of $20 within a seven-year period. Icahn argues that brings the value of his offer to about $15.50 to $18 a share.