The fight for Dell

July 18, 2013

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Michael Dell is in an awkward position, and not just because earlier today a lack of shareholder support forced him to postpone a vote on his $24.4 billion, $13.65-a-share buyout proposal to July 24. Dell is trying to convince shareholders that the growth prospects of his eponymous company are limited. Supporting the founder’s buyout, write Reuters’ Nadia Damouni and Anna Driver, are investors who are “ready to cash out of a company increasingly vulnerable to a crumbling PC market and already a shadow of an earlier self that led the global market and stood as a model of industry innovation”.

Dell’s gloomy pitch seems to be winning last-minute converts. Michael de la Merced reports that “a number of big institutional investors switched their votes to yes” last night, including Blackrock, Vanguard, and State Street. Some of those investors, Merced says, may have been waiting in hopes that a higher offer would materialize.

But that doesn’t appear likely: Dan Primack reports that “there is basically no way” Dell and his private equity partner Silver Lake are going to up their offer. Which leaves Carl Icahn’s leveraged recapitalization (now with warrants!) as shareholders’ only alternative. Matt Levine says that Icahn’s revised proposal won’t do much to convince shareholders who weren’t already on his side:

Icahn’s levered recap idea was basically: if you want some super levered Dell, I’ll cash out about 70% of the shares and let the remaining 30% ride on a much more levered company. The warrant idea is: let me add a bit more levered upside with warrants.

Jeffrey Goldfarb thinks that a publicly-traded and highly leveraged future for Dell is financially and strategically uncertain. “Upon a bit further reflection,” he writes, “Dell shareholders will probably come to the conclusion” that the best decision is accepting an approximately 50% premium to where the stock was trading 8 months ago. — Ben Walsh

On to today’s links:

Mapping shadow banking credit flows – FT Alphaville

In the last 6 months, 136,184 homes were flipped, up 19% from a year ago – CNBC

Morgan Stanley makes it 5/5 on big banks beating earnings expectations – Reuters
BofA used mortgage bonds to bet on lower yields. It didn’t turn out well – Reuters

Right On
Some bankers trade in boozy dinners for sweaty spin classes, others find that idea hilarious – Bloomberg

JP Morgan
JP Morgan may pay record fine for manipulating California energy markets – WSJ
The Federal Energy Regulatory Commission fined Barclays a record $435 million for the same thing on Tuesday – Marketplace

When Regulators Stop Being Polite
Shockingly, banks are losing some battles on tougher regulation – Dealbook
“The banks have finally ignited a modicum of courage in banking regulators” – Jesse Eisinger

“Speculative bubbles do not end like a short story, novel, or play” – Robert Shiller

Larry Summers’s billion-dollar bad bet at Harvard – Matthew Klein

Wells Fargo and JP Morgan have a larger combined market cap than the entire BRICs commodity sector – FT Alphaville

Data Points
By global standards, older Americans have remarkably high levels of employment – Economist’s View

Risk Management
Avoid breathing outside – Gothamist

“Yellen is great. But…” Ezra Klein on sexism and Fed succession – Bloomberg View

It wasn’t a bribe, it was hush money! – BBC

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