Michael Dell, Silver Lake and Special Committee Reach New Buyout Agreement Terms

Revised Agreement Increase Total Consideration to at Least $13.88 per Share

by Anton Shilov
08/02/2013 | 12:30 PM

The special committee of the board of Dell on Friday announced that it has entered into a revised definitive merger agreement with Michael Dell and Silver Lake Partners that increases the aggregate value to unaffiliated shareholders by at least $350 million. In return for the increased value to shareholders, the voting standard has been modified, which should allow the buyers to get necessary amount of votes to acquire the company.


Michael Dell and Silver Lake agreed to increases the purchase price to $13.75 per share, the same amount proposed last week. The buyers also agreed to pay a special dividend at or before closing of $0.13 per share as well as guarantee that the third quarter dividend of $0.08 per share will be paid at or before closing. The effect of the guarantee of the third quarter dividend is to potentially increase the total consideration payable to unaffiliated stockholders by an additional $120 million depending on whether the closing would otherwise have occurred prior to the record date for that dividend. All of the actions increase the offer to privatize Dell by over $350 million.

“The Committee is pleased to have negotiated this transaction, which provides as much as $470 million of increased value, including the next quarterly dividend that will now be paid regardless of when the transaction closes,” said Alex Mandl, chairman of the special committee.

In return for the increased value to shareholders, the voting standard has been modified such that the improved transaction will require approval by the majority of disinterested shares actually voting on the matter.

The committee intends to establish a new record date of August 13, 2013 for shareholders eligible to vote on the transaction at the special meeting which will be adjourned from August 2, 2013 to September 12, 2013.

The amended transaction also includes a reduction of the breakup fee that would be payable in the event the merger agreement is terminated and within 12 months thereafter the company effects a recapitalization transaction that does not result in there being an absolute majority stockholder of Dell. That fee is reduced from $450 million to $180 million.

“We believe modifying the voting standard is in the best interests of Dell shareholders, both because it has enabled us to secure substantial additional value and because it provides a level playing field for the decision facing shareholders. The original voting standard was set at a time when the decision before the shareholders was between a going-private transaction and a continuation of the status quo. Since then, the nature of the choice facing shareholders has changed because of the emergence of an alternative proposal by certain stockholders. In the context of the current decision, the Committee does not believe it is appropriate to count shares that have not been voted as having been voted in support of any particular alternative. Accordingly, we have changed the voting standard to require that the going-private transaction receive the approval of a majority of the disinterested shares that are actually voted. By resetting the record date and providing abundant notice of the new meeting we are ensuring that all disinterested shareholders, including those who have acquired their shares since June 3, have ample opportunity to vote for or against the transaction. We urge all shareholders to support this transaction,” added Mr. Mandl.

The transaction will be financed through a combination of cash and equity contributed by Mr. Dell, cash funded by investment funds affiliated with Silver Lake, a cash investment by an investment fund affiliated with MSDC Management, a $2 billion loan from Microsoft, rollover of existing debt, as well as debt financing that has been committed by BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets (in alphabetical order), and Dell’s cash on hand. There is no financing condition.

Investor Carl Icahn and its ally Southeastern Asset Management have made a number of different offers to derail the bid, most recently suggesting that the company repurchase most of the outstanding shares at $14 apiece and offer some warrants, reports Bloomberg news-agency.