Compellent and Dell have cooked up a poison pill shareholder rights deal to discourage any other bidders from coming forward and paying more than Dell.
Dell really does not want to get burned again after the 3PAR bid battle it lost to HP.
This is how the poison will take effect: All Compellent stockholders of record as of 27 December, 2010, will receive rights to purchase shares of a new series of preferred stock. If any person or identifiable group of people other than Dell buy 15 per cent or more of Compellent stock, or announce a tender offer for that amount of stock, then "each Right will entitle the holder to purchase from Compellent one one-hundredth of a share of preferred stock."
In more detail, each stockholder, but not the acquiring entity, "would be entitled to purchase, at the exercise price of the Right, such number of shares of Compellent common stock having a current value of twice the exercise price of the Right." Until the new acquirer has 50 per cent or more of Compellent's common stock, Compellent's board can "exchange the Rights, in part or in whole, for Compellent common stock. "
Here's the kicker:
"If Compellent is acquired in a merger or other business combination transaction, other than by Dell Inc or one of its affiliates, each holder of a Right (other than the Acquiring Person) would then be entitled to purchase, at the exercise price of the Right, such number of shares of the acquiring company's common stock having a current value of twice the exercise price of the Right."
This would make any bid by an alternative bidder to Dell much, much more expensive.
This poison pill has a one-year life span, as: "The Rights will expire on 27 December, 2011."
The mere setting up of this complicated scheme implies that there could be other potential bidders circling around Compellent.
Law firms are already on the case, with a few trying to set up class action suits asserting that Compellent's directors are under-selling the company. ®