RotaryGallop
  • Home
  • Reports
  • Services
    • Shareholder Activism
    • Strategic IR
    • M & A
    • Startups
  • Press
  • Blog
  • About
    • The Team
    • The Advisory Board
  • Contact
(217) 419 3257

Dell’s Deal Diverging

2/12/2013

0 Comments

 
Investment fund, T Rowe Price, has opposed Michael Dell's plans to take Dell private.  For details on the opposition see the WSJ write up here. The gist is that T Rowe Price and Southeastern Asset Management have a blocking position on the deal, but they are crucial players to get the deal done. 


Here is  what Rotary Gallop’s Control Analysis Reveals:
Picture
This analysis assumes that Southeastern Asset and T Rowe Price vote against the deal and all other shareholders are as likely to vote for it as against it.

  • It is not a surprise that Dell is a prime target for going private. High insider ownership is big plus for these transactions. According to our soon-to-be-released Control and Vulnerability in the S&P500 Study, Dell ranks in the top 10th percentile for insider’s control. They are number 4 in the Information Technology sector and number 1 in their sub industry. (You’ll be hearing a lot more about this study in early March)
  • Because insiders will not be voting, S&T (Southwestern Asset Management + T Rowe Price) has 14% of the effective vote. That is more than 3 times the next largest shareholder. 
  • This give S&T Control (read the deciding vote) in 86% of all possible outcomes to this shareholder vote, and a 93% chance of winning. 
  • No one else has control over 12%. Only 4 other shareholders have more than 5% control.
  • In order for S&T to lose, there would have to be near-uniform support for the deal from all other shareholders. 
  • When you add the fact that abstention counts as a no-vote it becomes effectively impossible for Dell to win without S&T's support. 
  • Therefore if the deal is going to move forward Dell will have to find a way to please S&T. 


Note 1:  There are two factors that, given reliable information, would improve the calculation:
  1. An estimate of the percent of outstanding stock that will abstain from voting - This will likely fall somewhere between 5 and 12%. This factor will decrease Dells chances of winning. 
  2. An estimate of the Arb position in the stock and what fraction of it is positioned FOR the deal - This factor may improve Dell's chances of winning, but it depends drastically on the estimate.
Note 2: The above analysis uses the current known list of shareholders, and does not account for likely large number of arbs who are now in the stock. You'll find reference in the linked WSJ story to an estimated 20% of voting stock held by arbs, and some analysts hoping that those shares will make it an easy win for DELL. No such luck! We'll ride right past the fact that arbs can take both sides of a deal, especially one with hints of trouble, and simply note that 20% doesn't come close to matching the ~15% of shareholders who are publicly against the deal when you add in any reasonable estimate of abstention, which can ranges from 10-20%. )
0 Comments

Your comment will be posted after it is approved.


Leave a Reply.

    Enter your email address:

    Delivered by FeedBurner

    RSS Feed

    Archives

    February 2014
    October 2013
    February 2013
    January 2013
    December 2012
    June 2012
    March 2012
    February 2012
    November 2011

    Categories

    All
    Activism
    Contested Situation
    Icahn
    Iss
    Lcv Capital
    Moduslink Global
    Negotiating
    Peerless
    Pershing Square
    Projections
    Proxy Strategy
    Raging Capital
    Risk Management
    Steel Partners


Big Data Analytics for Governance, Risk and Compliance