Michael Dell (Photo credit: Geoff Livingston)
Despite pressure from billionaire Carl Icahn, Michael Dell has steadfastly refused to increase his bid for the company, which would pay shareholders $13.65 per share. Michael Dell’s proposal got a big boost last week when Institutional Shareholder Services, the influential shareholder advisory firm, recommended that shareholders approve his deal, but that does not seal the deal by any stretch.
Dell’s stock fell by 1% in Tuesday morning trading and briefly traded below $13, meaning that investors are really starting to question whether Michael Dell will be successful on Thursday. The stock also fell by about 1% on Monday and is now trading well below Michael Dell's $13.65 per share offer.
Some big shareholders of Dell have declared they are voting against the deal. In addition to Icahn and Southeastern Asset Management, who have publicly led the charge against the deal, T. Rowe Price is now officially standing in opposition to the transaction, as are Pzena Investment Management and Yacktman Asset Management. In total, according to The Wall Street Journal, shareholders representing 19% of Dell’s stock are now openly against the deal.
For Michael Dell, the math remains very tight. The shares belonging to Michael Dell and other insiders, about 16% of the shares outstanding, are not being counted. Michael Dell needs 42% of the shares outstanding to support his deal to get it through. With 19% of the shares outstanding already voting against the deal and all shares that are not cast being counted as no votes, Michael Dell needs a large majority of the non-declared shareholders to vote in favor of the buyout. The backing of ISS does mean that Michael Dell should lock down much of the index fund vote, which represents about 25% of the shares.
For his part, Icahn is claiming that Michael Dell’s bid is too cheap and instead is proposing a leveraged recapitalization of the company that would see shareholders tender 1.1 billion shares for $14 each. Proponents of Michael Dell's deal suggest shareholders should take the certainty he is offering given the obstacles facing the company.