Icahn's Challenge to Dell Deal Dies With Judge's Ruling

NEWS ANALYSIS: A Delaware court’s ruling and the renegotiated terms of the bid clear the way for Michael Dell to buy the company and take it private.

Michael Dell should be looking at a clear runway to buying his namesake company and taking it private, barring any unforeseen problems.

Between the agreement he reached with Dell’s board of directors earlier this month and the recent court ruling against activist investor Carl Icahn, Michael Dell will most likely see his $25 billion bid to buy the PC maker accepted by most shareholders when they vote Sept. 12, a proposal that Icahn has worked for months to derail.

Icahn’s last credible shot at stopping the deal ended Aug. 16, when Delaware Chancellor Leo E. Strine Jr. rejected his request to expedite the lawsuit in which he claimed the board’s Special Committee was wrong to renegotiate the terms of the deal with Michael Dell, as well as Icahn’s attempts to have the investor vote on the deal run the same day as the company’s annual shareholders’ meeting.

Strine instead sided with the Special Committee, saying the group appointed by the board to deal with Michael Dell and financial backer Silver Lake Partners had done a good job negotiating the process. The chancellor’s ruling essentially did away with Icahn’s only real chance to stop the proposal.

“Home free—maybe I wouldn’t quite use that term yet,” Roger Kay, principal analyst with Endpoint Technologies Associates, told eWEEK. “But as far as major obstacles [still in the way], I don’t see that.”

Rob Enderle, principal analyst with the Enderle Group, noted Icahn’s Tweet Aug. 13 that he had taken a “large position” in consumer tech giant Apple, and that he believes the company is “extremely undervalued.”

“Icahn is litigious, so he could continue to be a pain,” Enderle said in an email to eWEEK. “However, he appears to have shifted focus to Apple of late, which is bad news for [Apple CEO Tim] Cook but good for Dell. The [Strine] ruling and changes [to Michael Dell’s bid] should allow Dell and Silver Lake to close the deal.”

The CEO’s plan to buy the company and take it private has been under pressure since it was first announced in February. Some major investors complained that the $13.65-per-share offer was too low and that it undervalued the world’s third-largest PC maker, and promised to vote against it. After several months, Icahn emerged as the key opponent, harshly criticizing the board, Michael Dell and the offer and proposing a counterbid that would pay $14 a share and keeping the company public.

Michael Dell has argued that taking the company private offers the best way for executives to accelerate Dell’s restructuring from primarily a PC company to an enterprise IT solutions and services vendor. Endpoint Technologies’ Kay said the plan is not guaranteed to work, but that for a company like Dell—whose fortunes are being hammered by the decline in the PC market, and which needs to invest a lot of money if it hopes to make the transition work—there are few alternatives.

“It’s the best course available to the company,” Kay said. “It’s very ambitious.”