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Dell board postpones buyout meeting

Michael Dell buys time for stakeholder lobbying

Dell board postpones buyout meeting
Michael Dell needs to convince more investors that cashing in their shares is the best option.

Dell Inc's future remains uncertain after a Thursday meeting of shareholders called to vote on proposed privatisation measures was adjourned minutes after it was called into session, Reuters reported.

Stakeholders will now vote on Michael Dell's $13.65-per-share bid on Wednesday. He had managed to rally the last-minute support of a number of major investors, but it was insufficient to assure acceptance of the $24.4bn buyout proposal tabled by him and Silver Lake Partners.

Michael Dell wants to take private the company he founded in his college dorm room, so he can focus on an enterprise services business model without being hampered by public scrutiny. But his bid has been criticised by some shareholders as undervaluing the company and underestimating its potential for future earnings.

The two largest stakeholders after Dell himself - Carl Icahn and Southeastern Asset Management - have cobbled together their own bid, which would keep the company publicly listed, but it cannot be considered by shareholders until they have voted on the Dell-Silver Lake offer.  

"This delay reflects the unhappiness of Dell stockholders with the Michael Dell-Silver Lake offer, which we believe substantially undervalues the company," Icahn said in a joint statement with Southeastern. "This is not the time for delay but the time to move Dell forward."

The delay in the vote will buy Michael Dell more time to argue for the go-private option. His success hinges on convincing more shareholders that the company's best days are behind it and that it is too late to turn around a PC manufacturing division that has failed to compete in the tablet segment and continues to be hit by a slide in global PC unit shipments.

His detractors, such as Icahn, believe the enterprise services model can be realised without the need to delist the company. If Icahn is to be successful he would have to convince shareholders to vote against Dell's bid and force the installation of a new CEO and board of directors. He has already presented a list of nominees for the board and CEO role, but his candidates have been criticised by analysts as inexperienced.

According to Reuters, around 77% of shares were pledged by Thursday, suggesting a high number of abstentions, which would be counted as "nays" in a live vote. Michael Dell is estimated to be about 100m shares short of the 735m needed for his proposal to pass.

Some investors remain hopeful that Michael Dell and Silver Lake will raise their offer, but analysts consider this unlikely. Two insiders have previously told media that any increase in the bid would have to be financed by Michael Dell and he would not be willing to increase a $13.65 bid on shares that were trading at $10 before news of the potential buyout broke. Despite briefly reaching a level above the bid's offer price, Dell Inc have since declined and closed at $13.12 on the Nasdaq on Thursday.

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