Icahn Increases Stake in Dell as Battle Over Future Continues

By Jeffrey Burt  |  Posted 2013-08-06 Print this article Print

The 4 million new shares gives Carl Icahn 8.9 percent of Dell, making him the second-largest shareholder after the founder and CEO.

Carl Icahn may still be trying to spike Michael Dell's bid to buy his namesake company, but even if the deal goes through, the billionaire investor stands to make a lot of money

Icahn bought 4 million more shares of Dell stock Aug. 1, giving him 8.9 percent of the company—about 156.6 million shares—and making him the second-largest shareholder after Michael Dell, according to a filing with the Securities and Exchange Commission Aug. 5.

Icahn bought the stock a day before shareholders were scheduled to vote on the $24.4 billion offer from Michael Dell and financial backer Silver Lake Partners. The vote eventually was postponed a third time after the CEO and Silver Lake increased their offer and the special committee appointed by Dell's board of directors to oversee negotiations agreed to change shareholder voting rules, a move that should make it easier for the Dell/Silver Lake proposal to pass.

Shareholders are now scheduled to vote on the new deal Sept. 12.

Icahn, who with fellow Dell investor Southeastern Asset Management has submitted a counterproposal that he has said is superior to Michael Dell's, has harshly criticized the CEO's proposal and the special committee's handling of the matter.

He is suing the company over the voting rules changes, and on Aug. 5 announced he had filed a brief with the Court of Chancery in Delaware to expedite the lawsuit.

"Among other things, the brief explains how we believe the Dell Board has breached its fiduciary duties by taking the actions it disclosed late last week," Icahn said in a statement. "In addition to requesting expedited proceedings, the brief also explains why Dell should hold its Special Meeting and its Annual Meeting on the same date and time."

Michael Dell and Silver Lake in February announced a proposal to buy the world's third-largest PC maker for $13.65 a share and take it private, a move that the CEO said would make it easier and faster to transform the company from a PC vendor to an enterprise IT solutions and services provider.

Some large investors, including Southeastern and T. Rowe Price, balked at the plan, saying the price was too low and threatened to vote against the proposal. Over the following months, Icahn has emerged as the primary opponent of the deal, offering an alternative that includes buying up to 1.1 billion shares at $14 each and keeping the company public.

He also wants the current Dell board removed and replaced with his own slate of candidates, and has said that if he gains control of the company, Michael Dell would not return as CEO.

The shareholder vote had been delayed twice in July in order to give Michael Dell and Silver Lake more time to talk with investors. The CEO in late July said he would increase the offer to $13.75 a share in return to changes in the voting rules, which at the time had all shares that hadn't been voted automatically going into the "no" column and making it difficult for Michael Dell to get the 42 percent of the vote needed to have the deal approved.

The CEO had argued it was unfair that a minority of voters—about 20 percent of shares are expected to be voted against the deal—could defeat an offer that most voting shareholders wanted. Icahn railed against any changes to the voting rules and filed a lawsuit to stop them.

On Aug. 2, the special committee announced it was altering the voting rules and accepting Michael Dell's offer to increase the share price to $13.75, and adding another 13 cents per share once the deal is approved and then 8 cents for each share for third-quarter dividends. The new rules and increased price should make it easier for Michael Dell to get the deal approved next month.

Icahn has vowed to continue his efforts to derail the deal, but even if he is unsuccessful, he will walk away with a profit. He bought about the 4 million new shares for $12.94 each, which could result in more than $3 million in profits from the new shares if the deal goes through. According to the Wall Street Journal, the overall worth of his Dell portfolio is more than $2 billion.



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