Wednesday, July 24, 2013
No surprise, I guess. The board seems to be doing what it can to ensure this deal doesn't go down in flames. I suppose they see the company's future without the deal as so bleak that they are willing to take some extraordinary steps to get it through. New today: Dell and Silver Lake have "upped" their offer by $0.10. Not much. Certainly not enough to move some of the loudest critics off their positions. In any event, here's the new offer:
Our proposed amendments to the merger agreement are as follows:
1. increase the merger consideration to $13.75 in cash per share of Company common stock, representing an increase in the consideration to be paid to unaffiliated stockholders of approximately $150 million; and
2. modify the “Unaffiliated Stockholder Approval” requirement in the merger agreement to provide that the voting requirement is the approval of a majority of the outstanding shares held by the unaffiliated stockholders that are present in person or by proxy and voting for or against approval of the merger agreement at the stockholder meeting.
This is our best and final proposal. We are not willing to discuss any further increase in the merger consideration nor are we willing to increase the merger consideration to $13.75 per share without the change to the Unaffiliated Stockholder Approval requirement described above. If the Special Committee believes that it would be appropriate to reset the record date for the special meeting in connection with this change to the Unaffiliated Stockholder Approval requirement, we would be ready to accept a new record date so long as the resulting delay in the special meeting is the minimum required by law.
We believe our proposed change to the Unaffiliated Stockholder Approval requirement is fair and reasonable to the Company’s unaffiliated stockholders, particularly in the context of our willingness to increase the merger consideration. 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. If a majority of the shares held by unaffiliated stockholders who vote are voted in favor of the merger agreement, it would be unfair to deny these stockholders the merger consideration they wish to accept solely because shares not voting are counted as votes against the transaction.
Hmm. Number 2 is very interesting. A couple of weeks ago, Chancellor Strine was asked to rule on a motion to expedite prior the shareholder vote (Transcript: Motion to Expedite). His reaction? No. He ruled that there were sufficient procedural safeguards ( see e.g. In re MFW) in place such that if unaffiliated shareholders felt that this deal was not in their interests, they had the power to vote the deal down, so no injunction. I wonder what he would say today. He certainly couldn't be as confident that unaffiliated shareholders now have the power to vote down the deal, because they no longer do. Now, it may be that the fact that Dell has effectively neutralized his 16% vote through a voting agreement is enough to get them over the line in front of a judge, but it's not a slam dunk. The Chancellor's confidence stemmed from his feeling that a majority of the minority were "fully able to protect themeselves" given the combination of Dell's neutralized vote and the voting requirements. Now, one of those protections is gone.
My guess is this transaction will be back in court before August 2. I suspect it may go less well for the board the next time if the Special Committee agrees to this change in the voting rules, but that is a risk it looks like the board feels it might have to take.
Prof. Lynn Lopucki has helpfully annotated the DGCL to make it more readable. This is a great resource for students wading through the code for the first time and for junior associates who took corporate law, but for some reason survived the class without ever having cracked the code (tsk, tsk...). You can download it here.