Institutional Shareholder Services, a major shareholder advisory group, has given Michael Dell/Silver Lake Partners’ controversial $24.4 billion take-private deal for Dell the thumbs up.
“After evaluating the risk of accepting the offer – truncation of value if the business transformation is successful – versus the risk of rejecting the offer – meaningful loss of value if the business transformation falters – ISS recommends clients vote FOR this transaction, which offers a 25.5% premium to the unaffected share price, provides certainty of value, and transfers the risk of the deteriorating PC business and the company’s on-going business transformation to the buyout group.”
In a statement released Monday morning, the Dell special committee evaluating the $13.65 per share buyout lauded the decision, which may be important to shareholders who are still weighing a competing bid from Carl Icahn, according to Fortune Magazine’s Dan Primack. Icahn has argued that the proposed take-private offer “significantly undervalues” the company and that Dell should remain public but issue a special $9-per-share dividend.
At least one former Dell exec agreed that this take-private arrangement doesn’t fairly value Dell as a whole. He told me in May that his expectation was that the new management will cut fat and sell off what’s left of the company at a much more attractive terms. And, in fact, Dell’s own Special Committee on the deal, which reports to Dell’s board of directors, last week recommended that Michael Dell et al. sweeten their offer. That in itself indicated they had some doubt as to whether ISS would back the existing bid. The offer was not amended.
All of this action comes as Dell, still a power in PCs and servers but which seemed to miss the boat on smartphones and other mobile devices, is building out its cloud and services businesses.