Dell Inc's special committee and a group led by founder and Chief Executive Michael Dell are nearing a deal that dramatically increases the chances of his $24.6 billion buyout going through, two people familiar with the matter said on Friday.
The agreement, in exchange for a modification of rules for voting on the deal, would include a special dividend of 13 cents per share along with an offer increased by 10 cents per share to $13.75 per share and is expected to be announced shortly, the people said.
Dell shares were up about 5 percent at $13.60 before the opening bell.
The buyout vote, held under a new standard, would likely take place in early September, while the record date, which determines which shareholders are entitled to vote, would be reset from June 3 to sometime in August, one of the people said.
The new deal and delay in the voting date boost the buyout consortium in several ways.
Abstentions under the previous voting system counted as "no" votes, and with an estimated quarter of eligible shares not having been voted either way, that was a substantial hurdle to overcome. Under the new deal, shares that are not voted would be excluded from the tally.
A change in the record date by more than two months is also seen as enfranchising so-called arbitrage investors - hedge funds that bought Dell stock more recently to earn a few cents per share and would likely support the buyout.
Under the deal, Dell shareholders would also be entitled to three regular quarterly dividends of 8 cents per share totaling 24 cents, since the first deal with Michael Dell and Silver Lake was announced on February 5.
Dell shareholders are scheduled to convene for a third time in Round Rock, Texas, on Friday to vote on Michael Dell's original $13.65 per share buyout proposal, but this meeting will now be adjourned. The vote has already been delayed two more times, on July 18 and July 24.
Dell's founder and private equity firm Silver Lake want to take the company private, arguing that a painful restructuring can best be best performed away from stock market scrutiny.
But the battle over that deal has raged for months, adding further uncertainty about a company already shrinking along with a rapidly declining PC market.
The CEO, his advisers and proxy solicitors have gone back and forth with shareholders whose votes are needed to secure the deal. They've had some success, managing to get prominent investors such as BlackRock Inc and Vanguard onboard.
The Michael Dell-Silver Lake group said last week it would raise the offer to $13.75 per share if the voting rule was changed but the special committee rejected that offer earlier this week. The special dividend has now clinched a compromise.
Activist investor Carl Icahn, who views Michael Dell's offer of $13.65 as too low, has amassed an 8.7 percent stake in the company and is leading an opposing charge with Southeastern Asset Management Inc with an offer of their own.
Icahn has campaigned hard to get Dell to set a date for an annual shareholder meeting so he can put up his own slate of company directors.
On Thursday, he fired his latest broadside, suing Dell Inc and its board to block substantial changes to the CEO's buyout offer that would include changing the voting and record dates.
The company, created by Michael Dell in his dorm room in 1984 and which rapidly grew into a global market leader, is now a shadow of its former self.
Some investors, led by Icahn and Southeastern Asset Management, are convinced Dell still has time to transform itself as a public company into a dominant provider of business computing services.
Icahn has accused the company of resorting to "scare tactics" by disclosing bad news and dismal forecasts. Dell reported a 79 percent drop in profit for the latest quarter.