Icahn Sues In Bid To Foil Dell Deal

  • Activist views go-private price as too low
  • Board has changed terms, deadlines
  • Deal with Silver Lake pending since February

Icahn asked a court to block rule changes Michael Dell has proposed and that the board accepted for a shareholder vote. Icahn and his affiliates also want the court to void a change to the record date by which shareholders must have purchased their shares in order to vote. They want to stop Michael Dell from voting any Dell shares acquired since Feb. 5 at any annual shareholder meeting. The February date was when his buyout bid was announced. The lawsuit also seeks the court to void the company’s decision to changing any shareholder voting requirements.

Dell’s founder and his partner in the go-private bit, the 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.

The lawsuit, filed in the Court of Chancery of Delaware, seeks to force the company to call an annual shareholder meeting on the same day as the special meeting on the buyout, which was reset to Sept. 12. The board has set Oct. 17 as the date for the annual meeting.

“My personal reaction, bombastic,” said Larry Hamermesh, a professor at the Widener University School of Law in Wilmington, Delaware, referring to the lawsuit. “The linchpin of it seems to be that it’s inappropriate to move or create a new record date because that takes advantage of a cynical effort to put shares in the hands of arbitrageurs who will want to vote for the deal.”

Hamermesh pointed out that the judge who is likely to take this case, Leo Strine, often made the point in the takeover battle by industrial gases companies Air Products of rival Airgas that arbitrageurs are shareholders with the same rights.

Icahn, who views Michael Dell’s offer as too low, has amassed an 8.7 percent stake in Dell and is leading a charge with Southeastern Asset Management against the buyout with an offer of his own. He has been campaigning to get Dell to set a date for the annual shareholder meeting so he can put up his own slate of directors for the company.

A spokesman for Dell Inc declined to comment on the suit but said Dell board has always sought to act in accordance with its fiduciary duties.

The debate over the go-private transaction has dragged on for months, jeopardizing the future of the computer maker facing a decline in its core business of personal computers amid the growing popularity of tablets.

Dell’s special board committee accepted the new voting terms in a revised bid by Michael Dell and Silver Lake, which raised their offer price last week by 10 cents to $13.75 per share on the condition the voting rules were changed. Michael Dell also sweetened the offer by including a special dividend of 13 cents per share.

Some of Dell’s largest investors, who have abstained from voting on the buyout, told the company’s board that they would back the deal at the buyout group’s latest offer price, three sources close to the matter have told Reuters.

Poornima Gupta is a correspondent for Reuters in San Francisco.