Leading investor proxy advisory firm Institutional Shareholder Services came out in favor of Michael Dell's bid to take Dell private for $24.4 billion, the tech firm announced today.
Dell, along with private equity firm Silver Lake, has offered to pay investors $13.65 a share for the company he founded. (Shares are trading at $13.34 as of this writing; and the $13.65 bid represents a roughly 25% jump from closing prices on Jan. 11, when rumors of a possible deal emerged.) ISS said the certainty of the offer received, when stacked up against the risks associated with rejecting it, swayed the proxy service's vote in favor of the deal, according to Dell.
In a summation Dell provided of ISS's reasoning, the advisory firm said: "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."
Michael Dell's offer is competing against one proposed by activist investor Carl Icahn and asset management firm Southeastern Asset Management, which have proposed recapitalizing the company. But, according to a Bloomberg article, ISS rejected the dichotomy between Dell's go-private offer and Icahn's recapitalization. The article said the ISS report says:
The issue facing Dell shareholders at this meeting has been framed in some media commentary as a choice between the sale to Michael Dell and Silver Lake Partners, or the leveraged recapitalization proposed by Icahn and SAM. It is not. The alternative to accepting the buyout offer is to continue holding equity in a publicly traded Dell, with continued exposure to the risks and rewards of ownership.
ISS believes taking Dell private is the better alternative. Dell's special committee of board directors set up to consider the proposals was pleased with the proxy service's recommendation, noting the offer gives investors surety. "Given the Company's business challenges, intensifying competition, and deteriorating industry trends, a sale at $13.65 per share in cash provides the highest value and greatest certainty of any available alternative."
Icahn said Sunday that he believes Michael Dell is trying to buy the company 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.
Many analysts had expected Institutional Shareholder Services to come out against Dell's proposal, and with a vote scheduled for July 18, investors still have to hear from another proxy advisory service, Glass Lewis. Shares of the computer and tech firm were up 2.6% in premarket trading.
-- Material from The Associated Press was used in this report.
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