This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Deal: ISS Backs Dell's LBO

NEW YORK ( The Deal) - Michael Dell and Silver Lake Partners LP notched up a big win in their struggle with Carl Icahn to take PC maker Dell (DELL) private, as proxy advisory Institutional Shareholder Services recommended Monday, July 8, in favor of the founder and private equity firm's $24.4 billion offer for the company.

In its announcement, ISS acknowledged that the offer "transfers the risk of the deteriorating PC business and the company's on-going business transformation to the buyout group."
[Read: <a target="blank" data-add-tracking="true" href="http://www.thestreet.com/story/11971070/1/twitter-is-amazing-facebook-pretty-much-useless.html"><em>Twitter Is Amazing, Facebook Pretty Much Useless </em></a>]

News of the proxy firm's decision circulated early Monday morning, causing Round Rock, Texas-based Dell shares to rise nearly three percent in pre-market trading to about $13.38. The stock is still lingering at a discount to Michael Dell's and Silver Lake's $13.65 per-share offer, however.

The proxy solicitor's recommendation of the buyout is a substantial advance for Michael Dell, whose battle for his own company took on headwinds in recent weeks as activist investor Carl Icahn appeared committed to take a competing bid to the deal's July 18 vote date.

Reports recently emerged that Dell's special committee evaluating the deal was privately nudging the founder to once again increase his bid, even though Icahn seemed to be struggling to secure outside debt financing. The corporate raider also publicly called upon the buyout group to raise its offer to close the deal.

The Michael Dell/Silver Lake camp leaked the news they would not raise their bid, temporarily spooking investors late last week. The ISS recommendation for the deal at the $13.65 per share price tag should result in shareholders voting for Michael Dell's offer and rejecting Icahn's recap proposal.

Inaccurate reports speculating that ISS would go against the management buyout hit Dell stock hard Friday, sending shares to a low they had not seen since January of this year; shares fell more than two percent, to about $13.03. That was even lower than the stock had traded after Blackstone announced in April it would walk away from a potential bid and criticized the PC maker's business.
[Read: <a target="blank" data-add-tracking="true" href="http://www.thestreet.com/story/11970993/1/why-google-is-a-must-own.html"><em>Why Google Is a 'Must Own'</em></a>]

With ISS' recommendation, as well as that of the special committee, both Michael Dell and Silver Lake are well positioned for the July 18 deal vote. But they won't walk away with nothing, even if shareholders still reject the deal: the buyout team would be entitled to a breakup fee of at least $180 million.

Dell's special committee evaluating the deal, which has also approved the transaction and has struggled with Icahn's public attacks and criticism, signaled approval of the ISS thumbs-up and said: "We also believe rejection of this transaction would expose Dell and its shareholders to serious risks and uncertainties that will harm the company's business and erode shareholder value."

Written by Jonathan Marino

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
DELL $0.00 0.00%
AAPL $113.29 0.00%
FB $91.01 0.00%
GOOG $630.38 0.00%
TSLA $248.48 0.00%

Markets

Chart of I:DJI
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 +1.21 0.06%
NASDAQ 4,828.3250 +15.6170 0.32%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs