Dell, Icahn Exchange Fire Over Rule Change Proposal

Jul 29 2013 | 12:44pm ET

Dell Inc. founder Michael Dell has launched a media blitz with just days left to convince his company's board and shareholders to accept his new, higher offer for the company. But Dell's chief opponent, Carl Icahn, isn't resting on his laurels, either.

Dell spoke with The Wall Street Journal and Bloomberg News to push for acceptance of the now-$24.4 billion deal with private-equity firm Silver Lake Partners. The special committee of Dell's board handling the sale has until Friday to accept a proposal boosting the purchase price by 10 cents per share will also adopting a new rule that would make it easier to win its approval.

"The fact that many parties over many months looked at this company and were not willing to pay more than $13.65 per share made it hard to justify an increase," Dell told the Journal. "But we ultimately decided that it was appropriate to put more on the table in connection with asking for a change in the voting standard to allow a majority of the unaffiliated shares voting to determine the outcome."

Dell and Silver Lake have now offered $13.75—but only if the special committee change the rules to allow a majority of the shares voted to allow the deal to carry. Currently, the rules require a majority of all unaffiliated shares.

"The emergence of a large shareholder who bought stock only after we announced the deal and the unexpectedly low turnout" justify the change, Dell said. The current rules have "allowed our new large shareholder to organize a blocking position that could defeat our offer even though the majority of the unaffiliated shares voting would like to accept. Based on the number of shares currently voting on the deal, it only takes about 23% of the outstanding shares to block the transaction. This is an unfair result that does not accurately reflect what the shareholders want."

That large shareholder, Icahn, is also speaking out—against the rule change.

Icahn urged the special committee to reject the new deal and blasted Dell's statements to the Journal.

"The turnout at the special meeting now scheduled for Aug. 2 is not 'unusually low' and, based on Dell's recent prior experience with stockholder meetings, should not have been 'unexpected,'" Icahn wrote to Dell shareholders.

Dell did offer an olive branch to Icahn's chief ally, longtime company shareholder Southeastern Asset Management.

"I actually take Southeastern's opposition as a compliment," he said. "They are basically saying that they believe in my ability to navigate the risks and challenges of the transformation the company faces and would like to participate with me. I came to the conclusion that we could do what we needed to do better and faster as a private company, but I respect Southeastern's point of view."

"In contrast, Carl Icahn was not a shareholder when we announced the deal or at any time before, but the voting standard in our contract gave him the opportunity to buy into the company and organize a blocking position with a minority of the company's shares. That's why we've now requested that the standard be changed to allow the will of the majority of the unaffiliated shares voting on the transaction to control the outcome."

Dell also told the Journal that he planned to remain at the company he founded in his college dormitory room three decades ago, even if the deal is rejected. He said he would fight against the leveraged recapitalization plan pushed by Icahn. "I am ready to fight and I am committed to doing what I believe is right for the company."

Icahn plans a proxy battle to unseat Dell's board and fire Michael Dell if the buyout deal fails.


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