Dell buyout approaches critical vote deadline

Dell shareholders face a critical decision - whether or not to approve founder Michael Dell's proposal to take the personal computer maker private at US$13.65 a share.

The special shareholders' vote is now too close to call, with activist investor Carl Icahn and major shareholder Southeastern Asset Management repeatedly arguing that the offer undervalues the company and its growth prospects.

Dell may therefore decide to delay the vote to gain time to shore up stronger support for the deal, according to sources.

If shareholders say yes

Longer term, this means Dell will no longer be a public company and Michael Dell and his private equity partner Silver Lake will get their chance to turn it around away from public scrutiny.

But since the results are likely to be close, shareholders opposed to the buyout could exercise their Delaware, US appraisal rights, which basically means they are free to appeal to a Delaware judge to value their shares.

The option, however, is costly and time-consuming with no guarantee a judge would see things differently from Michael Dell.

Icahn at one point in the past few months threatened "years of litigation" should he not get his way. He may still resort to legal means to contest the deal.

If shareholders say no

This may have a number of implications.

Disruption - There will be continued uncertainty and disruption within the company. Analysts had warned that customers will defect because service could worsen during the struggle to turn the company private or keep it public.

Michael Dell has pledged to remain committed to the company he founded if his attempt fails.

Battle for the board- A pitched battle between Michael Dell and Icahn over control of the board may emerge. Icahn has already announced his own slate of board directors, though some analysts have questioned their credentials and turnaround expertise.

Icahn has called for a quick annual shareholders' meeting, at which investors can vote on nominated directors. He needs his new board to be elected to be able to put forward, for a vote, an earlier offer he made in partnership with Southeastern.

Michael Dell is expected to float the current slate of directors, with a few additions.

Higher bid from Michael Dell and Silver Lake - Michael Dell, after months of maintaining that the shares are worth US$13.65 a piece, may decide to bump up the offer to appease disgruntled shareholders and close the deal.

Any bump in the price will likely have to come from Michael Dell as Silver Lake had declined to raise its contribution further during late-stage negotiations leading up to the February 5 buyout agreement.

The Dell founder then agreed to roll over his shares at US$13.36 each to subsidize and finalise the deal at the US$13.65 offered to shareholders. The current offer is the sixth one since discussions started in earnest in October.

However, Michael Dell and Silver Lake have ruled out raising their offer even if a vote is delayed, sources said.