Some Dell swing shareholders ready to compromise - sources

NEW YORK, July 31 Thu Aug 1, 2013 7:12am IST

NEW YORK, July 31 (Reuters) - Some of Dell Inc's largest investors who have abstained from voting on a $24.4 billion bid led by founder Michael Dell to take the No. 3 PC-maker private told the company's board this week that they would back the deal at the buyout group's latest offer price, three sources close to the matter said.

The change of heart comes even as the special committee of Dell's board on Wednesday rejected new voting terms in a revised bid by Michael Dell and private equity partner Silver Lake, which raised their offer price last week by a dime to $13.75 per share on the condition the voting rules were changed. Currently, shareholders who abstain are counted as voting against the deal, but the buyout group wanted those investors to be excluded from the tally.

The shareholder votes that have come in so far are split about evenly, the sources said. That means those who have abstained from voting - who by some estimates constitute about 27 percent of the block - can determine the outcome.

Dell's special committee rejected the buyout group's request because it did not want to change the voting rules. But the sources said the compromise from some shareholders meant the deal would get approved if Michael Dell agreed to pay $13.75 per share with an amended record date.

A vote, which has been postponed twice before, is now scheduled for Friday and the sources said another adjournment is unlikely. The special committee has said it would put the original buyout offer of $13.65 per share up for shareholder vote.

The number of investors who are willing to change their minds or how much stock they owned in Dell could not be learned. But their willingness to vote now shows that a three-way deadlock that has dragged on for months and put the future of the computer maker in jeopardy may yet be broken, even though on Wednesday postures of the buyout group and the special committee only hardened more.

A source familiar with the matter said that the Silver Lake camp was deeply disappointed with the response from the special committee and now expects the deal to collapse.

Representatives for the special committee and the buyout group declined to comment.

Dell has been facing a decline in its core business of personal computers amid the growing popularity of tablets. Analysts have said that Dell's shares, which closed at $12.66 per share on Wednesday, could see a precipitous fall if the buyout offer were to fail.

Billionaire investor Carl Icahn, one of Dell's largest shareholders, has made a counter proposal, where he would have Dell conduct a large share buyback in a deal that he says would be worth $14 per share plus warrants to investors. He is backed by money managers Southeastern Asset Management and T Rowe Price. The three hold almost 17 percent of Dell, according to Thomson Reuters data.

A source close to Icahn and Southeastern said that the next step may be an annual meeting leading to the appointment of a new board of directors.

A spokesman for Southeastern declined to comment.

But a source close to the special committee said there was growing concern that Dell may find itself in dire straits if the buyout group's offer is rejected.

The drawn-out battle has meant shareholders are getting increasingly frustrated.

"I would prefer to see an up or down vote than to see this be dragged out," said Gautam Dhingra, CEO of High Pointe Capital Management LLC, an investor in Dell. "I would like them to outright reject the 10 cents and the change of the voting terms."

"I won't try to predict what will happen on Friday because they are so unpredictable," Dhingra said.

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