OPPOSITION to Michael Dell’s bid to take his computer company private grew on Wednesday, and billionaire Carl Icahn argued Dell had no right to delay a shareholder vote, even if the deal looked more likely to fail.
Holders of nearly 30% of Dell stock oppose the $24.4bn offer by founder Mr Dell and private equity firm Silver Lake, which is now scheduled for a vote in Austin, Texas, on Thursday. That includes shareholders who say they will vote against the buyout or have been reported to oppose it.
Dell may decide to delay the July 18 vote to gain time to win support for the deal, a person familiar with the matter said on Tuesday, asking not to be identified because the deliberations are confidential.
In an open letter to shareholders on Wednesday, billionaire activist investor Mr Icahn, who has amassed an 8.7% stake in Dell, said Dell’s special board committee must allow a final vote to be completed on July 18 as scheduled. He once again urged shareholders to oppose the buyout.
"Can you imagine a political election contest where one side could push off the election to wait for a better day to hold the election — a date when it is hoped they might do better in the vote than they would have done on the originally scheduled election date?" he wrote.
The stock ended down 1.1% on Wednesday at $12.88, its lowest level since July 5.
Mr Dell and Silver Lake have so far resisted calls, including from Dell’s special committee, to raise their $13.65 per share offer.
Two people familiar with the matter said on Tuesday the bidders would stick to their offer even if the vote was postponed. The sources asked not to be identified because they were not authorised to speak to the media.
The Wall Street Journal reported on Wednesday that Vanguard Group, the largest US mutual fund manager and holder of a 3.7% stake in Dell, and State Street, which has a 3.5% stake, were set to vote against the buyout.
Vanguard and State Street declined to comment.
Vanguard and State Street run index funds that typically follow the lead of shareholder advisory firms. Their decision to defy all the three main advisory firms that have recommended the Dell buyout would add to the uncertainty over the vote outcome.
Other key minority shareholders, including BlackRock, T Rowe Price Group, Highfields Capital Management, Pzena Investment Management and Yacktman Asset Management, have already come out against the buyout or have declined to comment on reports that they are against it.
Under so-called majority-of-the-minority voting provisions, a majority of Dell shareholders, excluding Mr Dell’s roughly 16% stake in the company, have to vote for the buyout for it go through.
This means shareholders, other than Mr Dell, who collectively own almost 43% of the Texas-based company need to vote for the buyout for it to go through.
Accounting for the stakes of Mr Icahn and his partner Southeastern Asset Management, the total against the buyout approaches 30% of Dell’s shareholder base.
To be sure, some shareholders supportive of the deal are holding their ground, including Invesco’s PowerShares line of exchange traded funds, which held a roughly 1% stake of Dell, according to recent filings.
Asked how they would vote, Invesco spokeswoman Kristin Sadlon said in an e-mail that the funds will vote in accordance with recommendations by Glass Lewis & Co. Like other proxy advisers, Glass Lewis has recommended shareholders vote in favour of the acquisition.
Dell’s special board committee will likely decide by Thursday morning whether or not to delay the vote, based on the number of votes that have been cast to block the buyout. Dell’s board has set up the special committee to independently assess the best option for shareholders, without influence from Mr Dell, who is the company’s chairman and CEO.
Mr Icahn has argued since March that Dell’s founder is trying to steal the company away from shareholders almost 30 years after he founded it with just $1,000.
Mr Icahn and Southeastern announced their latest alternative offer for Dell last week. It calls for a buyback of up to 1.1-billion shares at $14 apiece and a Dell warrant offered for every four shares held.
Each warrant would entitle the holder to buy one Dell share for $20 each within the next seven years.
Mr Icahn estimates the value of his latest offer at $15.50-$18 per share although Dell’s special committee disputes this.
For his proposal to be put forward for consideration by Dell shareholders, he must first succeed in having Mr Dell’s offer voted down and then win enough shareholder support to replace the members of Dell’s board with his own nominees.