Handicapping the chances of sweeter Dell deal

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Will Michael Dell and Silver Lake be forced to sweeten their offer to take the firm private?

A big debate has broken out, as more shareholders ponder what to do and as the industry waits for proxy advisory firms to make their determinations. The go-shop period is also in effect.

Bernstein Research analyst Toni Sacconaghi has downgraded the stock to neutral arguing that the LBO will likely be consummated. "We believe a deal is likely to be closed at or modestly above the current offer of $13.65," he wrote to clients, as noted by MarketWatch.

He also wrote that "a small risk exists that shareholders will not approve the deal, which would likely create material near-term downside for the stock, but overall, we see the risk-reward for the stock as being largely in balance."

But is the risk really that small?

As of now, we've noted that risk arbitrageurs hold about 20 percent of the stock. That figure may have risen by now. It's unclear if the group as a whole has fixed upon any single outcome. The stock has been hovering just above the offer price of $13.65 a share. If it zooms forward, it will be a clear signal that the market wants a bigger premium, a concern that Dell and Silver Lake would have to address.

Two of the company's biggest outside shareholders, Southeastern Asset Management and T. Rowe Price, have come out against the transaction, and we may see more critics merge soon. It might not take that much to create a groundswell. If one of the main proxy advisory services recommend against the deal, things will get interesting fast.

All that said, you would still have to believe that the chances of the deal as proposed will go through are higher.

For more:
- here's the item
- here's a Business Insider article

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