Dell hands Michael Dell a victory by changing shareholder voting rules to get to a deal

Time for a victory dance.
Time for a victory dance.
Image: AP Photo/Ahn Young-joon
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Michael Dell’s odds of getting approval for his deal to buy his company just got better. The special committee of Dell’s board approved new voting rules that would allow Michael Dell and his deal partners to seal the deal with yes votes from a majority of shareholder ballots cast. In exchange, the buyout group is throwing in a special dividend, in addition to a $0.10 bump of its offer to $13.75 a share.

Previously, the voting rules required that the deal gain approval from a majority of votes from Dell’s total shares. Ballots that weren’t cast were counted as no-votes. As a result, the last time votes were tallied for a shareholder meeting on the deal last month, the offer fell short of getting approved.

So Michael Dell and deal partner, private equity firm Silver Lake, asked that the standard for getting approval for the deal be changed to a majority of the votes actually cast, and not include no-votes resulting from unused ballots. Now the shareholder vote on the deal, which had been scheduled for today, will be postponed for a third time to Sept. 12. The date by which shareholders have to own Dell shares to be eligible to vote will also be moved from June 3 to Aug. 13.

That represents a major victory for Michael Dell and is sure to draw more shareholder lawsuits. Activist investor Carl Icahn and Southeastern Asset Management, two of Dell’s largest outside shareholders (Michael Dell is the largest), have already sued Dell and the board to maintain the current standards for getting the buyout approved. It’s rare to change the voting rules for a deal this late in the game.

Dell and the board have been validated by an earlier opinion of the Delaware business court judge, who said that the board had done a good job in extracting higher offers from the buyout group, suggesting the process was handled correctly. But Icahn, who has his own offer of a special dividend and recapitalization of Dell, has shown he is not going away. And now he has another month to stir up opposition to the deal.