Dell Inc. directors’ move to change shareholder voting rules for founder Michael Dell’s buyout bid worth as much as $24.9 billion has tainted the deal, investors challenging the offer said in court filings.
Dell’s board should be barred from allowing abstentions to be counted as no votes and pushing back the date of the vote in exchange for a sweetened offer from Michael Dell, lawyers for six pension funds that have sued over the deal said in a Delaware Chancery Court filing. Michael Dell and partner Silver Lake Management LLC are offering $13.75-per-share plus a 13-cent dividend to take the computer-maker private.
Dell and the company’s directors “cannot use the corporate machinery to rig the election,” the funds said in an amended complaint. Dell is the third-largest PC maker.
Shares of Round Rock, Texas-based Dell jumped the most in six months following the board’s decision last week to accept the offer from Dell, the company’s chairman, and to make concessions that boosted his chances of winning shareholder support for the bid.
David Frink, a Dell spokesman, said the company’s board acted “in accordance with its fiduciary duties” in connection with its decision to back Michael Dell’s enhanced offer.
Directors have “at all times sought to maximize value for Dell stockholders” in connection with their handling of the buyout offer, Frink said in an e-mailed statement.
The filing comes as Dell’s board faces an Aug. 12 hearing on billionaire Carl Icahn request to have his suit challenging Michael Dell’s offer put on the fast track. Icahn sued separately from the pension funds.
Delaware Chancery Court Judge Leo Strine in Wilmington will decide whether to speed up handling of Icahn’s suit and hear the billionaire’s arguments about the transaction’s fairness before a planned Sept. 12 shareholder vote on the deal. The pension funds also have requested expedited status for their combined suits.
Icahn contends Dell directors are seeking to “ram through a going-private transaction” instead of allowing investors to fairly consider his counter offer, according to court filings.
Dell officials have said that by taking the company private, Michael Dell is seeking more leeway to cut jobs and make shifts in strategy needed to court high-margin customers who spend billions of dollars on data centers.
Pension funds that hold Dell shares, including ones representing Florida firefighters and union electricians in Michigan, originally challenged Michael Dell’s offer in February.
The case is In RE Dell Inc. (DELL:US) Shareholder Litigation, CA NO. 8329, Delaware Chancery Court (Wilmington).
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