Michael Dell and Silver Lake Management LLC will not sweeten their US$24.4 billion offer to take Dell Inc private, people with direct knowledge of the situation said.
Dell and Silver Lake are ruling out an increase because the US$13.65 a share offer they made in February represents a fair and significant premium to where the stock would trade if the deal fell apart, said one of the people, who asked not to be identified because the process is private.
Dell shares dropped 2.1 percent to US$13.03 at close in New York on Friday.
The decision is the latest in the fight over Dell, set to culminate in a shareholder vote on July 18. While Institutional Shareholder Services Inc is leaning toward a negative recommendation on CEO Dell’s proposal, people familiar with the situation have said, billionaire Carl Icahn said this week that he secured US$5.2 billion in debt financing to support his third and last attempt to scuttle the leveraged buyout.
“Our recommendation is for Dell shareholders to take the US$13.65 per share deal and run,” said Brian Marshall, an analyst at ISI Group in San Francisco who has a neutral rating on the shares. “This company is in dire straits. They’ve got a lot of hurdles they need to surmount, and ultimately, if they vote down this proposal, the total outcome for investors is going to be less than the US$13.65.”
Dell and Silver Lake decided not to increase their offer after being encouraged to do so by the special committee of Dell’s board, people familiar with the situation said.
Silver Lake is willing to walk away from the deal if the bid is not successful, and the CEO is not prepared to finance personally another price increase as the company’s core PC market continues to deteriorate, one of the people said.
Representatives for Dell and Silver Lake declined to comment.
The special committee already negotiated six price increases before agreeing to the buyout announced on Feb. 5, a March 29 proxy filing shows. Michael Dell personally financed the last and final price increase with US$500 million in cash and by committing to roll over 273.3 million shares at US$13.36 apiece.