Dell buyout saga sees bid rise, vote put off (again)

• CEO Michael Dell raised his offer for the troubled PC maker%2C but by just a dime per share
• Dell%27s special committee is believed to be seeking a substantially higher bid
• Dell doesn%27t want abstentions counted as %22no%22 votes

SAN FRANCISCO — CEO Michael Dell's poker face may be put to the test in the coming week.

The chief executive on Wednesday increased a buyout bid by 10 cents for the troubled PC maker he founded in his college dorm room. But he also upped the ante by floating a voting change proposal with partner Silver Lake Partners that could stack the deck in his favor.

Dell and Silver Lake Partners bumped up their offer to $13.75 per share, which would add $150 million in value to the $24.4 billion deal, in efforts to sway shareholders.

Shares of Dell rose 3 cents, to $12.91, on Wednesday.

A shareholder meeting to vote on the buyout bid has been rescheduled for Aug. 2.

A letter from Michael Dell and Silver Lake, who want to take the company private, says the offer is "our best and final proposal."

That would appear unlikely in his gamble for the company's future that could allow a jump into higher-margin businesses as the PC market shrinks. That's because Dell's special committee would prefer a minimum price of $14 a share, according to experts in the matter, prompting a face-off.

"I think $14 or even more than that would be at least what they need to see," says Angelo Zino, an equity analyst with S&P Capital IQ.

The new offer certainly didn't mollify billionaire Carl Icahn, who is agitating for the CEO's removal and the board's overhaul under his plan to keep Dell public.

"All would be swell at Dell if Michael and the board bid farewell," Icahn tweeted.

One thing's for sure: Both camps will be working overtime to play up fears that the other's proposal would shortchange investors as they battle for shareholder support in the coming week.

"It's very, very close," says IDC analyst Matthew Eastwood of the buyout deal's prospects. "What Dell has tried to do over the last week is give these shareholders a chance to think about what might happen if the deal doesn't get approved."

CEO Dell's side is seeking an amendment that would only count votes that are for or against the deal. Under the original offer, neutral votes counted against Dell's bid. That means the notion that lots of abstentions could scuttle a deal would be off the table.

"There is simply no rational basis for shares that are not voted to count as votes against the merger agreement for purposes of the unaffiliated stockholder vote," Dell wrote in his letter.

Roughly 27% of the shares — not counting Michael Dell's stake, which is excluded from the tally — haven't been voted, according to a statement from the buyers.

Brian Quinn, associate professor of law at Boston College, says the proposed change in stockholder votes is "highly unusual," suggesting Dell is desperate to complete this buyout deal.

"They are now willing to accept a litigating risk that boards are usually never interested in touching," Quinn says. "Everything is on the table for the board to get this deal done."

Dell's board was originally scheduled to vote on the buyout offer last Friday, but postponed the meeting until today in a sign of insufficient support.

"This is an offer that acknowledges the concerns of investors with a competing offer on the table but is low because of the concerns of the value of the company going forward given the transitions they are going to have to make," says IDC analyst Crawford Del Prete.

Michael Dell's plan to buy back the company and take it private has been met with fierce opposition from some of its biggest shareholders, most notably Icahn and investment manager Southeastern Asset Management. The two have offered a competing proposal that Icahn valued between $15.50 and $18 per share. Dell declined the deal.

"Turning Dell around is going to be quite challenging," says Forrester analyst Frank Gillett, "but I think Dell has some interesting assets to do it."

In a June letter, Southeastern Asset Management said the initial Dell offer "undervalues the company and its prospects going forward."

According to CNBC, Dell shareholder Rich Pzena called the new offer "beyond outrageous." "It would be unconscionable if Dell directors accept this new offer," he says.

If the deal falls through, Eastwood says Dell stock will likely plummet "because market conditions have really deteriorated significantly since February," when Michael Dell and Silver Lake made their initial bid.

The No. 3 PC maker in the world continues to struggle along with the broader PC market, as more consumers move away from bulkier desktops and laptops in favor of smartphones and tablets. Global PC shipments have been down for five straight quarters, the longest slump ever for the industry.

A quick conclusion to this buyout saga will allow Dell to press forward with its plans to go in new directions, Eastwood says. "This deal needs to get done as quickly as possible so Dell can get down to business."

The bigger question is what will PC companies like Dell be worth in a few years as they navigate a difficult market, says Forrester's Gillett.

"I don't think that this dance we're seeing can play out much longer," says Jason Schloetzer, a professor of accounting at Georgetown University. "It's created a lot uncertainty in the share price."