A top proxy advisory firm is recommending that Dell shareholders vote in favour of a deal that would allow the computer maker's founder and an investment firm to buy the company and take it private.
Michael Dell and Silver Lake Partners have offered to buy Dell Inc. for $13.65 US per share, or a total of $24.4 billion. Michael Dell believes he can turn the company around by taking it private and diversifying into niches, such as business software, data storage and consulting.
But Carl Icahn, a billionaire investor and Dell's second-largest shareholder, says he wants Dell, which is based in Round Rock, Texas, to remain publicly traded and boost value for shareholders by buying back $16 billion in stock.
Institutional Shareholder Services has backed Michael Dell's proposal and said that Icahn doesn't have adequate financing for his plan. Shareholders will vote on the buyout offer at the company's annual meeting on July 18.
All-cash bid brings certainty, premium price
In its report, ISS pointed to the offer's hefty premium, about 26 per cent over the company's share price before the offer became public, and the certainty that comes with an all-cash bid.
ISS said that if shareholders don't take the offer, they have to be willing to continue to hold shares in Dell as it continues to transform itself amid the risks of a still deteriorating personal computer industry.
The special committee of Dell's board evaluating the company's options said in a statement that it was pleased with the recommendation, noting that it believes not going forward with the sale would expose the company and its shareholders to "serious risks" that would further reduce the company's value.
Icahn said Sunday that he believes Michael Dell is trying to buy the company he founded at a "bargain price." He reiterated the benefits of his alternate proposal, which would involve the repurchase of up to 1.1 billion Dell shares at $14 apiece.
Icahn's plan would be funded with $5.2 billion in debt, $7.5 billion in Dell cash and $2.9 billion from the sale of Dell receivables. Icahn has said he and his affiliates have $5 billion in existing equity and proposed debt financing to help fund their proposal.
Dell shares rose almost 41 cents, or 3.1 per cent, to close at $13.435 on the Nasdaq.