Shareholders voting on $24.4 billion Dell buyout

ROUND ROCK, Texas (AP) — Dell shareholders are voting Thursday on founder Michael Dell's plan to take the slumping computer maker private in hopes of engineering a turnaround away from Wall Street's glare.

In a sign that the vote could be close, a special committee of the company's board sent a letter to shareholders emphasizing its opposition to a rival plan from activist investor Carl Icahn. Dell Inc. also said the meeting could be adjourned quickly without a formal vote to give the board more time to round up support for the $24.4 billion buyout offer from CEO Michael Dell and other investors.

Supporters believe Dell Inc. stands a better chance of turning around if it can make long-term strategic decisions without worrying about meeting Wall Street's quarter-to-quarter expectations. But some big investors have already signaled opposition to the bid. Icahn believes the offer undervalues the company.

The company's decision to go private is a reflection of the tough times facing the personal computer industry as people delay replacing traditional computers and spend their money instead on the latest smartphones and tablets. PC sales have been falling, and tablets are expected to outsell laptops this year.

Michael Dell is hoping to evolve the company into a more diversified seller of technology services, business software and high-end computers — much the way IBM Corp. successfully transformed itself in the 1990s.

On Tuesday, Dell's special committee said Icahn could have trumped the Dell group's $13.65-per-share offer but instead submitted a recapitalization plan that it called risky and short on details. Icahn's plan calls for rewarding shareholders with some cash now but leaving about a third of the shares outstanding for shareholders to benefit from a successful turnaround. Icahn and his Southeastern Asset Management fund own a combined 13 percent of Dell.

"I believe it's a very, very close vote," said Patrick Moorhead, a technology analyst in Austin.

In corporate elections like this, shareholders can change their vote right up to the last minute. Michael Dell's task is made more difficult by an agreement that he would not cast his shares, which represent about 16 percent of the company's stock. That means the board needs slightly more than 42 percent of Dell's outstanding stock to accept Michael Dell's offer to get the deal done.

If Dell delays the vote because it doesn't have enough support, analysts say Dell's group might sweeten his offer.

It would have been hard to imagine the company facing this situation a decade ago, when it was leading the world in PC sales.

Last week, research firm IDC said worldwide PC shipments fell 11 percent in the April-June period, compared with a year earlier. That followed a 14 percent decline in the first three months of the year, the steepest quarterly drop since IDC started keeping records in 1994.

Dell shares have never recovered from their split-adjusted peak of nearly $60 during the dot-com boom in 2000. They were at a three-year high of around $18 in February 2012, when they started sliding again in the face of weakening PC shipments. Michael Dell began talking with potential partners about a private buyout even before the shares hit a low of $8.69 in November.

Icahn and Southeastern Asset Management have said that the buyout offer undervalues Dell, an opinion that has been echoed publicly by at least four more of Dell's top 20 shareholders. Icahn has proposed that the company buy back 1.1 billion shares at $14 each and added another element last week that will give stockholders warrants to buy additional shares. He has valued his plan at $15.50 to $18 per share.

If Icahn and Southeastern succeed in defeating the private-buyout offer, they would seek to replace the Dell board with their own slate of candidates and put their plan in effect. Icahn plans to oust Michael Dell as CEO but hasn't said whom he has in mind to run the company.

Michael Dell's group got a boost when that offer was endorsed by three big shareholder-advising firms.

Dell's stock fell 14 cents, or 1.1 percent, to close Wednesday at $12.88, below the $13.65 offered in the buyout. That's an indication that investors aren't holding out for a higher bid. Some analysts fear the stock will sink below $9 again if the deal with Michael Dell falls apart.

Michael Dell, the company's largest shareholder, is throwing in all of his stock and $750 million of his $16 billion fortune to help finance the sale to a group led by the investment firm Silver Lake. Dell's stock-and-cash contributions to the deal are valued at about $4.5 billion.

Software maker Microsoft, which counts Dell among its biggest customers, is backing the deal by lending $2 billion to the buyers. The remaining money to pay for the acquisition is being borrowed through loans arranged by several banks, saddling Dell with more than $15 billion in debt that could raise doubts about its financial stability among its risk-averse corporate customers.

The sale is structured as a leveraged buyout, which requires the acquired company to repay the debt taken on to finance the deal.