updated 10:23 pm EDT, Mon August 12, 2013
Dell board accused of 'stacking the cards' in favor of original offer
The Delaware Chancery Court has scheduled a hearing for Friday, August 12 at 12:30PM to determine if investor Carl Icahn should be granted an expedited hearing to attempt to block a change in voting rules in the Dell privatization process. The investor sued Dell and its special board to prevent what he views as an unfair change in the voting rules that CEO and founder Michael Dell lobbied the board for when he raised his offer for the company to $13.75 per share plus a $0.13 per share special dividend.
Icahn argues the new offer still seriously undervalues the company, and wants the court to stop the voting change. The change in voting turns votes that aren't cast into "abstain" votes, rather than the previous "vote against" Michael Dell and investment Silver Lake's offer to take the company private.
The current agreement has set the special meeting of shareholders for September 12, with an annual shareholder meeting of October 17. Icahn's lawyers are posing the question if "whether our law will allow these directors to act as Platonic guardians, repeatedly refusing to take 'no' for an answer on the merger, stacking the cards in its favor and deliberately postponing the annual meeting." Icahn must prove that he has been irreparably financially damaged in order to win the expedited hearing.
Icahn's offer trumps Dell and Silver Lake's offer at a value of up to $18 per share, with the company remaining public. Icahn also claims to be able to fire the existing board, and force Michael Dell out of the company he founded.
"I've been through a lot of these fights. Most of these boards are pretty dysfunctional but I've never seen a board as bad as Dell's. They go out and scare the shareholders,￼" according to Icahn. He did confess that he thought that the "guys on the board aren't bad people. They just do whatever the CEO says. They read their checks. They make $400,000-$500,000. It's a nice life. They go play golf. So they're not going to go stand up to him."
In a June interview with CNBC, Icahn blasted Michael Dell and the board. "(Michael) Dell has done a really poor job, the board has done an awful job. You know I don't blame Dell as much as I do the board. They're giving the damn thing away," Icahn added. "If you are an institution, why would you want this guy still running the company?"
Following Icahn's original $14 per share offer, Michael Dell called his offer sufficient, and refused to raise it, despite pressure to do so by advisory firms. The existing privatization deal put on the table by Michael Dell requires the majority of the shareholders (not including Dell's own shares) to vote in favor of the payout. Southeastern Asset Management, another vocal opponent of the Michael Dell buyout, would lose at least $825 million if the privatization deal completes as Michael Dell has proposed. Dell has dramatically cut its forecasts for 2013 operating profit by $700 million, to an estimated $3 billion -- casting further shadows over any deal.