Dell Inc. postponed a shareholder vote on its CEO's $24.4 billion buyout offer to Wednesday after failing to get enough support to seal the deal, despite winning over several large investors at the eleventh hour.
The adjournment of the meeting, called minutes after shareholders gathered on the outskirts of Austin to decide on what could be the largest buyout since the financial crisis, buys time for co-founder and Chief Executive Officer Michael Dell to persuade naysayers to switch sides.
Complicating matters, billionaire investor Carl Icahn, who has amassed an 8.7 percent stake in Dell, is leading a charge with major shareholder Southeastern Asset Management against the buyout with an offer of his own. He and others say Michael Dell's deal undervalues the world's No. 3 personal computer maker.
Investors are divided over Dell's prospects. Some 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.
Others remain convinced the company founded out of Michael Dell's dorm room in 1984 can transform itself into a dominant provider of business computing services - under his leadership or otherwise.
In the week leading up to Thursday's meeting, Icahn's team and Dell's special board committee - which supports the CEO's proffered deal - have flooded shareholders with letters and documents to argue their respective positions.
Vanguard and BlackRock Inc. are now on board with the proposal, sources familiar with the matter told Reuters on Thursday.
Still, they said Michael Dell and private equity partner Silver Lake fell about 100 million shares short of the 735 million that they need for the buyout to pass.
Some investors say Michael Dell may have to raise his $13.65-a-share offer to secure the deal, but sources say he and Silver Lake remain reluctant to do so for a company that traded at about $10 before news of the buyout surfaced.
Dell shares climbed 2.4 percent to $13.19 in morning trading.
It is unusual for corporations to adjourn shareholder meetings on such short notice, but governance experts say it can be done if the company bylaws allow it.
Over the next week, the board will encourage the apparently large number of shareholders that had not cast votes to support the deal, said mergers expert Brian Quinn, an associate professor at Boston College Law School.
"To encourage these votes to come out, they will likely also try to re-engage Silver Lake to seek out a higher price," he added.
On Thursday, Icahn was quick to respond to what he called an "unfortunate" adjournment.
"This delay reflects the unhappiness of Dell stockholders with the Michael Dell-Silver Lake offer, which we believe substantially undervalues the company," he said in a statement issued with Southeastern.
"This is not the time for delay but the time to move Dell forward."
Vanguard and BlackRock had previously opposed the deal, but ultimately switched sides, a source said, requesting anonymity because the matter is not public.
Other investors previously seen as swing votes, such as State Street Corp., Bank of New York Mellon Corp. and Invesco also voted in favor of the deal on the eve of the shareholders' meeting, the source said.
T. Rowe Price Group Inc., Highfields Capital Management, Pzena Investment Management and Yacktman Asset Management have previously voiced opposition to the deal.
Vanguard declined to comment. Representatives of the investment firms were not immediately available for comment.
Board member Alex Mandl, chairman of the special committee overseeing the buyout, set the new meeting date for Wednesday.
Under so-called majority-of-the-minority voting provisions, a majority of Dell shareholders excluding Michael Dell's roughly 16 percent stake would have to vote for the buyout for it go through.
Shareholder Ed Benson from San Antonio had expected the meeting to be adjourned.
"It's very hard to acquire that many votes," said Benson, who supports the buyout proposal.