The Deal: Dell Committee Rejects Buyout Group's Vote Revamp

NEW YORK ( The Deal) -- The Dell ( DELL) special committee rejected Michael Dell and Silver Lake's attempt to alter the vote structure for the $24 billion buyout of Dell pushing the Silver Lake group to offer another bump or take a chance on a Friday vote.

The Silver Lake group raised their offer from $13.65 to $13.75 with the condition that the vote threshold for the majority of nonaffiliated shareholders to the buyout include only those who vote so that shareholders who abstain or fail to cast a vote would no longer automatically count as votes against the transaction.

The special committee Wednesday said it was not prepared to accept the higher price in exchange for the altered vote mechanism and was prepared to proceed with the vote Friday on the $13.65 per share deal.

The response from the special committee seems more of a further request that the Silver Lake team continue to negotiate, especially given that the $13.75 price has already been floated.

The vote has already been in question on the $13.65 per share buyout, given the adjournment on July 18 to continue soliciting favorable votes, so the idea that shareholders would accept $13.65 now seems ridiculous. Certainly the Dell special committee is weighing the legal risks of altering the vote structure relative to the 10 cent bump and decided a better price was necessary to make the merger contract adjustment. Perhaps the push back will allow the Silver Lake-Dell team an opportunity to bend on their "best and final" position.

The buyers want to do the deal, otherwise they would not have made the July 23 approach to raise the price. But there has been some market speculation that given the deterioration in the PC business, Silver Lake might be reaching a point where they will be comfortable letting the buyout lapse.

How close the vote is itself is uncertain. The special committee's offer to alter the vote date again and change the record date should assist the buyout group as a considerable number of Dell shares have traded since the existing June 3 record date at prices above the deal price,

In either case, the dialogue over the potential deal has shifted from Carl Icahn and Southeastern Asset Management's alternative proposal of a recapitalization to a public stand-off between the special committee and the Silver Lake group.

Shares of Dell traded Wednesday for $12.49 at a spread of $1.27, or 10%, to the revised Silver Lake buyout, which is not the deal before shareholders on Friday. That spread reflects concerns that the buyout will not be further amended and will fail to get shareholder approval.

Written by Scott Stuart.

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