Oh no you did not, or at least won’t, Dell, if Carl Icahn has his way. The activist investor has sued Dell and its leadership over a decision to delay a vote on the buyout offer of Michael Dell and Silver Lake, which totals $13.75 per share, following a mild $0.10 per share sweetening offered in late July.
According to CNBC, the lawsuit, filed in a Delaware court, would block the new meeting date; this would force a vote more quickly, and as Icahn obviously thinks, a vote that is not likely to go in favor of Michael Dell’s rival offer to his own bid. Icahn is in this for money, and that’s utterly fine, but gumming the Michael Dell offer could be, in the end, a bad move for Dell.
Icahn’s tender offer would not take Dell fully private, but instead remove most of its shares from public trading. This would raise the per share earnings of that stock, which Icahn would own the majority of; his plan would use debt to enrich the value of his own shares. Again, financial engineering is not to be mocked prima facie, but at this point Dell’s sickness is known, and the prescription isn’t more debt and continued status as a public company.
But Icahn is a shareholder, and a wealthy one at that, with legal counsel to spare. So, here we are.
Rewinding slightly, Dell rejected the voting premise in Michael Dell’s latest offer, but was “willing to establish a new record date for a vote on a $13.75 per-share transaction under the existing voting standard.” So they took the higher price, but dumped the new terms that Michael wanted to staple to it. I didn’t know that was legal.
However, things went sideways when a new voting date was established to, in the view of Daniel Ritort, give the board time to “drum up more support.” That is precisely what Icahn wishes to avoid; if Dell shareholders accept the Michael Dell offer, he’s out a metric [redacted] of money. Well, potential earnings, at least.
Still, I can’t sit here and not say the following: In my humble view, Dell does in fact need time as a private company to rebuild its crumbling OEM business and potentially lucrative business service arm. Icahn does not offer that to the firm.
If Icahn’s injunction sticks, we’ll have a vote this week. If not, the next. $13.75 and going private of Icahn’s financial gymnastics. Again, it’s time to choose.
Top Image Credit: Ethan Lindsey