After promising to sell his shares at a discount and increasing the price of his offer, Michael Dell, founder of Dell, has today vowed to stay at the firm regardless of the success of his bid to take the company private.
This is not a surprise, given that Dell owns a large equity stake in the company. For him to step back if his plan to take the struggling computing giant failed would almost be odd; given how much of Michael’s personal fortune is tied up in the company, to fully step back would be the functional consignment of his wealth to others.
Who would be comfortable with that?
In an interview with the Wall Street Journal, Dell stated that he, in the language of the paper, “wouldn’t sell assets or commit to any leveraged recapitalization as some shareholders have advocated.” This means that Michael would not take part in the plan advocated by activist investor Carl Icahn, that would see a tender offer put forth for most of the shares in Dell corporation at a price slightly higher than what its founder has offered.
Michael Dell wants to take the company private, to give it space to reform, and rebuild its product line and business service offerings. The only current competing offer, via Mr. Icahn, would not grant the Dell company that flexibility, though, it would greatly boost the per-share revenue of the equity that Icahn would control after newly acquired debt was used to fund the repurchase of other shares.
Michael Dell and his partner Sliver Lake recently boosted their per-share offer for Dell shares to $13.75 from their former offer of $13.65. That small margin was the target of criticism when it became known. As I reported at the time:
How can Michael Dell and his partner think that they can get away with such a pathetic sweetening of their former offer? Because what Icahn has in mind for Dell is complex and not in the best interest of the corporation. The firm needs time as a private entity so that it can rebuild its OEM business and focus on expanding its business services arm. It cannot do that with sufficient flexibility if it is chained to quarterly earnings reports.
Given what Michael Dell has said to the Journal, either Dell shareholders accept his offer at the August 2 meeting, or perhaps Icahn won’t have access to enough shares to execute his plan. This essentially limits the options of shareholders to two: Accept what the founder has in mind, or sit adrift.
Ironically, the company continues to trade at a discount to both offerings, signaling that the market lacks confidence in either plan to reach conclusion. Time is short, and this chapter is all but closed for the famed OEM.
Top Image Credit: Dell Inc.
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