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Carl Icahn, on the heels of the Dell special committee’s rejection of Michael Dell’s latest $26.6 billion proposal to take the company private, is pushing to have the shareholder vote on the plan go ahead as scheduled on Aug. 2 rather than postpone it for a third time.
The billionaire and top Dell investor, who has been working for months to spike the deal, urged the committee not to delay the vote again, saying it was clear that the proposal put together by Michael Dell and financial backer Silver Lake Partners is doomed and should be put to rest.
“Enough! The stockholders have spoken—and they do not want to be frozen out by Michael Dell/Silver Lake,” Icahn wrote in a July 31 letter to the special committee and shareholders. “Let the vote happen on Friday [Aug. 2]. Michael Dell has said he is ‘at peace either way.’ We are glad to hear it! It is time to let the proposed freeze-out merger die.”
Michael Dell and Silver Lake in February unveiled a $24.4 billion deal to buy the world’s third-largest PC maker and take it private. The CEO has argued that doing so will help him and other executives speed up the company’s transformation from a PC maker to an enterprise IT solutions and services vendor.
The $13.65-per-share deal has faced headwinds since it was announced, particularly from big investors—including Icahn, Southeastern Asset Management and T. Rowe Price—who said the offer undervalued the company and promised to vote against it.
Icahn and Southeastern have pulled together a competing proposal, offering to buy up to 1.1 billion shares for $14 each with the promise to let investors buy more shares later. The deal would keep the company public, and Icahn has vowed that should he gain control of Dell, Michael Dell would no longer be CEO.
The two sides have spent the past couple of months in a very public debate over the company’s future while working hard behind the scenes to swing shareholders their way.
In recent weeks, it has become apparent that Michael Dell and Silver Lake may not have the necessary 42 percent of shares needed to get the deal approved. The vote initially was scheduled for July 18, but was delayed until July 24. Michael Dell last week submitted a new offer that bumped up the price to $13.75 per share, with the caveat that he wanted a change in the voting rules.
Right now, any shares not voted are automatically placed in the “no” column. Michael Dell—despite helping negotiate the terms of the vote as part of the proposal with the special committee selected by the board of directors—has argued that the rule as it stands now is unfair.
“Currently, over 25 percent of the unaffiliated shares have not voted,” Michael Dell wrote in his proposal to the special committee. “This means that even if a majority of the unaffiliated shares that vote on the transaction want to accept our offer, the will of the majority may be defeated by the shares that do not vote. I think this is clearly unfair.”
He said the new proposal was his best and final offer, and said in a July 24 letter to shareholders that he was “at peace” and would accept their decision.
The special committee rejected the proposal July 30, but said that if Michael Dell and Silver Lake were to keep the $13.75-per-share price, it would delay the vote again into August. In addition, it would allow for some new shareholders to vote on the deal. Currently, only shareholders who held stock as of June 3 could vote. If Michael Dell keeps the new price, the committee could change that date to sometime in early August, allow investors who bought Dell stock after June 3 to vote.
Michael Dell has yet to say whether he will accept the new committee proposal.
In his July 31 letter, Icahn blasted Michael Dell for wanting to change the voting rules and remove what he said was one of the few shareholder protections in the deal. Icahn also said he fears that should shareholders reject the deal, the CEO will try to increase his share of stock from the more than 15 percent he already owns in an attempt to keep control of the company he founded 29 years ago.
“The Dell Board must consider this question seriously and should prevent Michael Dell from buying votes by buying shares,” Icahn wrote. “What we view as the ill-effects of Michael Dell’s influence have been broadly felt. Since Michael Dell returned as CEO [in 2007], the stock has dropped from $24.22, to this morning’s price of $12.46. The freeze-out merger was his idea all along and it has been shown to be an unpopular one. The Board should not aid him by permitting him to increase his influence at Dell.”