Compellent-Dell deal adopts poison bill route

NEW YORK, USA: After agreeing to a $960 million takeover by Dell Inc, Compellent Technologies Inc has adopted a shareholder rights plan that would be triggered if a rival suitor attempted to buy 15 percent or more of the storage technology company.

Compellent, which did not disclose whether it had received any alternative offers, said the plan, commonly known as a poison pill, would allow shareholders rights to buy a new series of preferred stock.

Also Read: Dell's CEO transformation is on the way

Dell announced plans to buy Compellent on Dec. 9, just three months after it lost a bidding war to Hewlett-Packard Co for another storage company, 3PAR.

Hapoalim Securities analyst Kevin Hunt said the move was probably a technicality aimed at making sure the Dell deal goes through rather than the result of any interest from an outside bidder because Compellent had been up for sale for months.

"Anybody who wanted to bid had ample time and knowledge of what it takes to buy them" before the Dell pact, Hunt said.

Under the plan, Compellent declared a nontaxable dividend of one right for each outstanding share of the company. Shareholders could exercise the rights only if a person or group other than Dell bought 15 percent or more of Compellent stock or announced a tender offer for 15 percent or more of the company.

Compellent said the plan would give its board time to evaluate any alternative offers so it could maximize shareholder value.

Poison pills, which became fashionable in the 1980s, let current shareholders massively increase the float at a steep discount to ward off unwanted suitors.

The plan applies to stockholders of record at the close of business on Dec. 27 and expires exactly a year later.

Dell's proposed purchase of Compellent for $27.50 per share is part of a bigger trend by technology companies to buy smaller ones to expand their products for business clients.

IBM announced an agreement in September to buy data analytics company Netezza for $1.7 billion, while EMC struck a deal to buy Isilon in November.

Compellent shares were up 0.6 percent at $28 in early trading, while Dell dipped 0.2 percent to $13.26.