Icahn Takes Shot at Dell Board for Considering Postponing Vote

Andrew Klips  |

In an open letter to Dell shareholders, billionaire investor Carl Icahn and Southeastern Asset Management lashed-out at reports that the Dell   (DELL) Board of Directors may decide to delay the vote regarding the $24.4-billion proposal by chief executive Michael Dell and private equity firm Silver Lake Management LLC to take the PC maker private.  The vote, which is considering the $13.65-per-share proposal, is scheduled for Thursday, July 18 at 8:00 AM CDT.

In order to pass, the vote requires a majority vote, not including Michael Dell’s 16-percent ownership of shares.  Combined, Icahn and Southeastern own about 12.8 percent of DELL shares, not even close to enough to nix the deal on their own.

Commenting on the reported potential for a postponed vote, Icahn and Southeastern believes it’s “either to get more votes for the Michael Dell/Silver Lake transaction, or for the Special Committee to try to negotiate a better price.”

“Can you imagine a political election contest where one side could push off the election to wait for a better day to hold the election – a date when it is hoped they might do better in the vote than they would have done on the originally scheduled election date?,” the letter read.

The battle between Icahn and Southeastern versus Dell and Silver Lake has been waging for months with no shortage of drama.  Icahn wants Dell to repurchased approximately 1.1 billion shares at $14 each and leave the company public.  Icahn has gotten the support to oppose the Dell/Silver Lake proposal from some other stakeholders such as Pzena Investment Management Inc. (PZN) and Yacktman Asset Management Co.

Last week, Icahn encouraged shareholders to notify the company of an objection to the price of the offer, vote “no,” and opt for “appraisal rights” which would later be determined in a court proceeding.  Icahn believes that the Dell/Silver Lake proposal undervalues the company and that it is a “no brainer” to opt for appraisal rights as an opportunity to make additional profits without any risk.

The Dell Special Committee rebuked Icahn’s concept of pursuing appraisal proceedings, citing several reasons, including costs and risks associated with that course of action.  After all, there is no assurance that the court would value the company’s shares at $13.65 each; it could be less.

Michael Dell has recently garnered the support of Institutional Shareholder Services Inc., a firm that institutional investors look to for guidance on voting, for the buyout offer.  Other influential proxy advisory firms Glass Lewis and Egan-Jones have voiced their support as well, recommendations that certainly bode well for Dell, although not clinching anything.

The Dell Special Committee has repeatedly explained to shareholders its rationale for supporting the deal.  Icahn argues that, although the committee says it is leaving the final decision with disinterested stockholders, they are campaigning for the deal to get the necessary “for” votes.

The key here seems to be “six months.”  As Icahn and Southeastern say, it has been almost six months of the Special Committee trying to get shareholders on board with voting for the deal.  It’s also been six months of Icahn saying that the company is worth more.  But, then again, I didn’t see any higher offers coming to the table in six months either.  Just vote.

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