Bloomberg News

Icahn Gives Up Dell Fight While Saying Offer Too Low

September 09, 2013

Billionaire Carl Icahn

While billionaire Carl Icahn said he was still against the proposal and would seek appraisal rights, his surrender removes a major obstacle to the takeover bid of Dell Inc. Photographer: Scott Eells/Bloomberg

Billionaire Carl Icahn gave up his fight to control Dell Inc. (DELL:US), saying he continues to oppose founder Michael Dell’s $24.9 billion plan to take the company private because it undervalues the computer maker.

Dell and partner Silver Lake Management LLC sweetened their takeover proposal last month, offering a dividend of 13 cents a share on top of an already increased $13.75-a-share bid for the computer maker. The price is still 70 percent below the stock’s 10-year high of $42.38, Icahn said in a filing today.

“I realize that some stockholders will be disappointed that we do not fight on,” Icahn said. “While we of course are saddened at our losing the battle to control Dell, it certainly makes the loss a lot more tolerable in that as a result of our involvement, Michael Dell/Silver Lake increased what they said was their ‘best and final offer.’”

While Icahn said he was still against the proposal and would seek appraisal rights, his surrender removes a major obstacle to the takeover bid. Dell, who serves as chairman and chief executive officer, is pushing to take the PC maker private so he can execute a turnaround plan outside the spotlight of public markets.

Shareholders will convene on Sept. 12 at Dell’s Round Rock, Texas, headquarters to vote on the buyout. It’s the fourth such scheduled meeting -- the previous three were adjourned amid procedural steps by CEO Dell, Silver Lake and the special committee of Dell’s board managing the process.

‘Lot Easier’

“It’s going to make the shareholder meeting a lot easier,” Shannon Cross, an analyst at Cross Research, said of Icahn’s decision. “Now we’re going to have to just sit back and see whether Michael Dell succeeds with the company. It’s going to be good for the industry that there is some certainty about how Dell is going to end up.”

Dell was little changed at $13.85 at 9:52 a.m. in New York. The shares had risen 36 percent this year through last week, mirroring the increases in the takeover proposal.

Investor-advisory firms Institutional Shareholder Services Inc., Glass, Lewis & Co. and Egan-Jones Ratings Co. have all put out reports reiterating their endorsement of the Silver Lake-led buyout. The group sweetened its offer on Aug. 2 and guaranteed payment of the company’s third-quarter dividend by the time the deal closes.

The moves swayed investors including Franklin Mutual Advisers and BlackRock Inc. (BLK:US) to support the deal. The vote this week would effectively mark the end of a saga that’s stretched out for most of this year as Dell tried to win support for his buyout against opposition by Icahn and other dissident shareholders.

Appraisal Tactic

Icahn is taking his chances that he can get a better price than the current takeover offer by going to court. In July, he disclosed that he had opted for appraisal rights on the 152 million Dell shares that he owned. At the time, he also urged other shareholders to seek appraisal rights under Delaware law, a process that entitles them to receive “fair value” for their shares as determined by the state Chancery Court.

In order to qualify for the appraisal process, stockholders must forgo voting in favor of Michael Dell’s bid and submit a written demand for appraisal before the ballots are cast. In his regulatory filings, Icahn said other stockholders could seek help with the appraisal process by contacting the billionaire through D.F. King & Co., the proxy solicitation firm that he employed.

Within 120 days of the effective date for the buyout, investors who exercised their appraisal rights are entitled to receive a statement from Dell on the number of other investors that also took the same route. The Delaware Chancery Court would then hold hearings to determine the fair value of Dell common shares, and Dell would be required to pay that amount, plus interest, once the court reaches a decision. The final amount could be more or less than what Michael Dell is paying through the buyout with Silver Lake.

To contact the reporters on this story: Sarah Frier in New York at sfrier1@bloomberg.net; Miles Weiss in Washington at mweiss@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net


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