Michael Dell founded the Dell company in 1984, and now, as CEO, he’s trying to take the company private with private equity firm Silver Lake. Investor Carl Icahn, however, is doing everything in his power to stop that from happening. The company will have a shareholder meeting July 18 to decide.
Ichan’s history of trying to stop the privatization of Dell began back in March. At that point in time, he offered shareholders $15 per share for up to 58.1 percent of the stock. In May, Ichan partnered with Southeastern Asset Management Inc. and offered $12 per share in cash or additional Dell stock. Under those terms, investors would still retain stakes in a public company.
In June, Ichan offered to help finance a buyback proposal that would offer $14 per share. This time, he has modified the $14-a-share deal, by adding a warrant for every four shares. The warrants could be used in the next seven years to purchase shares for $20.
Of course, accepting Ichan’s deal means investors are assuming shares will reach $20 within the next seven years, which they might. This deal is largely seen as a tactic to coerce Dell into raising his current bid of $13.65 to buyout the company.
Michael Dell announced his plan to take over the company in February. Speaking on taking the company private, Dell said, “I think this is very good for our customers. It gives our shareholders an opportunity to take advantage of some of the benefits of the things that we are doing as a company without taking on all the risks that I and Silver Lake will bear.”
While Dell began with PCs and servers, that time seems to be coming to an end. Technology is at a point where computer sales are decreasing, and smartphone sales are skyrocketing. In response, Dell is looking to direct its attention toward cloud data storage, software and consulting.
Taking the company in a new direction is risky, but Michael Dell is committed to doing so. He noted that taking the company private will allow them to do so without worrying about the pressures of Wall Street.
With endorsement from the Institutional Shareholders Services Inc., Dell’s proposal seems most likely to be successful. The ISS reported concern with the risk associated with Ichan’s latest proposal and held its recommendation that come July 18, shareholders vote for Dell’s offer.
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