The board of Dell has recommended that shareholders should accept an offer led by the company’s founder Michael Dell to take the firm private.
It called on shareholders to approve his $24.4 billion buyout offer at a vote on July 18.
The board said it was the “best alternative available”.
Investor Carl Icahn and Southeastern Asset Management – who own a combined 12% of Dell – oppose the buyout and have made an alternative offer.
Michael Dell and private equity group Silver Lake have offered $13.65 per share in cash to shareholders in return for taking the company private, which would see the company delisted from the stock exchange.
The offer price values Dell 37% higher in terms of market capitalization than in January, before Michael Dell’s buyout plan emerged.
Michael Dell has pledged to shift the business away from PCs into mobile devices and business software.
“A sale to the Michael Dell/Silver Lake group… is the best alternative available,” the board wrote in an open letter to shareholders on Friday.
The board of Dell has recommended that shareholders should accept an offer led by the company’s founder Michael Dell to take the firm private
“In a challenging business environment it offers certainty and a very material premium over pre-announcement trading prices.
“Having conducted a thorough and probing review of Dell’s challenges and opportunities, we believe that the risks and uncertainty of a standalone public company are high and that the transaction we have negotiated offers superior value for Dell stockholders.”
Carl Icahn and Southeastern Asset Management have offered an alternative that would give Dell shareholders $12 per share in cash or additional shares. While this is a lower figure than Michael Dell’s offer, it would allow investors to retain their stake in the company.
A committee of Dell board members evaluating this offer has said it needs more information.
Dell has seen its profits fall amid declining sales of personal computers as more consumers shift to smartphones and tablets.
The 18 of July shareholders’ meeting will take place at Dell’s headquarters in Texas.
Michael Dell has said that he will buy back the world’s number three PC manufacturer that he founded and that carries his name for $24.4 billion.
Michael Dell, together with technology private equity investor, Silver Lake, will offer $13.65 cash per share.
The firm said it offered a 25% premium over the Dell’s valuation in January when rumors of the deal first broke.
The buy-out of the Nasdaq-listed firm will be financed by loans from four banks, and a $2 billion loan from Microsoft.
Michael Dell, who is also chief executive and chairman of the firm, already owns about 14% of the company. He and fellow senior executives will retain their existing stakes.
Dell’s success over the last 29 years has made its founder one of the richest men in America. By buying his company back, he will be taking it off the stock market almost 25 years after it was first listed.
Analysts said the move would give Michael Dell greater flexibility in turning the company around, by dispensing with the need to deliver strong results every quarter to shareholders on the stock market.
The entrepreneur said that the firm’s long-term strategy would “still take more time, investment and patience, and I believe our efforts will be better supported by partnering with Silver Lake in our shared vision”.
“One of the key questions is going to be how much influence Microsoft is going to have over Dell’s strategy,” said Cindy Shaw, analyst at Discern Group.
Michael Dell has said that he will buy back the world’s number three PC manufacturer that he founded and that carries his name for $24.4 billion
Microsoft provides the operating systems – Windows and Vista – for Dell’s computers, as well as for rival PC makers such as Hewlett Packard.
Michael Dell founded the company – originally named “PCs Limited” – in 1984 at the age of 19, operating out of his dorm room at the University of Texas.
He later dropped out of university in order to develop his PCs, including innovative laptops, and to expand his business overseas.
But over the last decade, Dell has faced increasingly steep competition, from cheaper Asian PC manufacturers such as China’s Lenovo, and from innovative rivals such as Apple and Samsung whose tablets and smartphones have superseded the desktop and laptop.
The company appeared to lose its direction between 2004-07, when Michael Dell stepped down from day-to-day management of the company, and has suffered a number of false starts since his return, including the unsuccessful launch of its “Streak” tablet computer in 2010.
Michael Dell first approached the board with a buy-out proposal in August, and news of the talks emerged in mid-January, propelling the company’s share price higher.
However, the share price still remains some way below the $17-$18 level it was trading at a year ago, and well below its all-time high of just under $60 in 2000.
Completion of the buy-out, which will require shareholder approval, is far from agreed.
Before completing the deal, Dell’s board said it will conduct what it called a “go shop” period of 45 days during which it would actively seek competing offers to buy the firm at a better price.