Michael Dell gains support of Institutional Shareholder Services for buyout offer

Shareholders of Dell Inc. are slated to vote on the offer on 18 July.

Michael Dell.
Dell Inc. CEO Michael Dell. Credit: Getty Images.

Institutional Shareholder Services, a US-based shareholder advisory firm, has recommended that shareholders in Dell Inc. consider the $24.4bn buyout offer made by Dell CEO Michael Dell.

Michael Dell’s offer of $13.65 per share is supported by equity funding from investment firm Silver Lake.

The shareholders are slated to vote on Michael Dell’s offer on 18 July.

The Dell CEO does not plan to increase the offer price for per share, reports Reuters, citing people familiar with the matter.  

Michael Dell intends to make the company private in an effort to shift the firm’s dependence from lower-margin PC business to higher margins products and services such as storage systems, security software.

In the first quarter of fiscal 2014, Dell posted a 79 per cent drop in net earnings to $130m, compared with $635m for the same period a year ago, due to sluggish demand for personal computers and narrower margins.

ISS’s backing for Michael Dell may influence the investors who are looking for a new direction, especially in a scenario where billionaire activist investor Carl Icahn and Southeastern Asset Management have made a competing offer of $14 per share.

In order to accept Icahn’s bid, shareholders will have to first reject Michael Dell's offer and then elect a new group of directors.

Brian White, an analyst at Topeka Capital Markets, was quoted by Reuters as saying that ISS considers that Icahn's offer comes with a great deal of uncertainty.