Dell, Silver Lake disagree on breakup fee: report

Dell, Silver Lake disagree on breakup fee: report

Summary: If the $24.4 billion sale of Dell to its founder and Silver Lake Management fails, it's unclear what the fee will be for the losing side.

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TOPICS: Dell
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Photo illustration: Andrew Nusca

No one wants to talk about what happens if they lose, of course, but a new Bloomberg report suggests that Michael Dell and Silver Lake Management have not come to agreement on the breakup fees incurred if their bid to buy computer maker Dell for $24.4 billion fails.

Silver Lake believes it is entitled to a $450 million fee if the alternative proposal to buy the company, from billionaire and No. 2 shareholder Carl Icahn, succeeds within a year, Serena Saitto reports. That proposal includes a 1.1 billion-share buyback at $14 per share, keeping the company private.

Dell maintains that Silver Lake would only be reimbursed for expenses. According to a March 29 filing with the U.S. Securities and Exchange Commission, Silver Lake is entitled to the fee if the board changes its recommendation.

The official language from the filing is as follows:

The Company will pay to Parent (or one or more of its designees) a termination fee in the event that:

  • (a) the merger agreement is validly terminated (1) by the Company because the effective time of the merger has not occurred by the termination date if, at the time of such termination, Parent would have been entitled to terminate the merger agreement because a Parent termination for Company breach has occurred, (2) by the Company or Parent because the meeting of the Company’s stockholders has concluded and the approval of the proposal to adopt the merger agreement by the required vote of the stockholders has not been obtained or (3) by Parent because a Parent termination for Company breach has occurred, (b) the Company or any other person shall have publicly disclosed or announced an acquisition proposal on or after the date of the merger agreement but prior to the date of the special meeting of the Company’s stockholders and (c) within twelve months of such termination, the Company enters into a definitive agreement with respect to an acquisition proposal or an acquisition proposal is consummated (in each case whether or not the acquisition proposal was the same acquisition proposal referred to in clause (b)) except that for purposes of this clause (c), the references to “20%” in the definition of “acquisition proposal” shall be deemed references to “50%”;
  • the Company has terminated the merger agreement to enter into an acquisition agreement related to a superior proposal with a person or group that is not an excluded party; or
  • the Parent has terminated the merger agreement because the Board or any committee thereof (including the Special Committee) has made a change of recommendation.

The amount of the termination fee will be $450 million in cash, except that the amount of the termination fee will be $180 million in cash in the event that:

  • the Company has terminated the merger agreement to enter into an acquisition agreement related to a superior proposal with a person or group that is an excluded party at the time of such termination; or
  • the Parent has terminated the merger agreement because the Board or any committee thereof (including the Special Committee) has made a change of recommendation and the event giving rise to such termination is the submission of an acquisition proposal by a person or group that is an excluded party at the time of such termination.

The deciding shareholder vote is scheduled for this Wednesday evening; it was delayed one week so that Dell and his financial backer could garner more support for their bid.

Topic: Dell

Andrew Nusca

About Andrew Nusca

Andrew Nusca is a former writer-editor for ZDNet and contributor to CNET. During his tenure, he was the editor of SmartPlanet, ZDNet's sister site about innovation.

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2 comments
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  • luis river

    M dell and their kindred groups try to secure it as maximum leader in the privatization of DELL, but the reality is other, C Icahn a successful businessman, this putting nervous to M Dell and to their flattering ones. The offer of C Icahn and their partners is judicious and of great future and he would give that change to DELL that we all want
    luis river
    • That's hillarious to hear

      Icahn is nothing more than a corporate raider. He is death to Dell and any other company he gets control of. Look at his history...strips the company of all value and them bails.
      timspublic1@...