Key Court Decision Due on Icahn's Lawsuit Against Dell

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Chip East/Bloomberg via Getty ImagesActivist investor Carl Icahn
By Amrutha Gayathri

A Delaware court will decide Monday whether to expedite a lawsuit filed by Carl Icahn against Michael Dell's proposal to take Dell private for almost $25 billion, setting the scene for a face-off between the two billionaires.

On Aug. 2, Michael Dell and Silver Lake Management raised their buyout offer to $13.75 a share, and a special dividend of 13 cents a share plus a regular dividend of 8 cents a share, in exchange for a change in voting standards, which would ensure abstentions would no longer be counted as votes opposing the buyout.

In his Aug. 1 lawsuit against Dell (DELL) and its board of directors, Icahn asked the court to force the computer giant to hold side-by-side votes on Michael Dell's offer and on Icahn's proposal for a rival offer to buy back 1.1 billion shares at $14 apiece, in addition to one warrant for every four of their shares, allowing stockholders to buy one Dell share for $20 over the next seven years.

Icahn, who owns about 9 percent of Dell shares, according to Bloomberg, contends that the buyout bid by Michael Dell, who owns about 15 percent of the stock, undervalues the company.


Icahn's attorneys will seek to expedite hearings on the lawsuit, on grounds that Dell's shareholders will vote Sept. 12 on Michael Dell's offer. Icahn's competing offer is set to expire Sept. 30 and Dell's executive board is scheduled to hold a vote Oct. 17, The Wall Street Journal reported (subscription required).

In a statement, Icahn, the chairman of Icahn Enterprises (IEP), told the court that shareholders will be harmed if the case isn't heard soon because Michael Dell's offer "is nearly certain" to come through, due to recent changes in voting rules, Bloomberg reported.

Chancellor Leo Strine of Delaware's Court of Chancery could go either way in deciding whether to allow a speedy verdict on Icahn's lawsuit, because Delaware courts traditionally are hesitant to interfere in shareholder-voting procedures, observers who spoke to the Journal said. But, Icahn's argument that changes in shareholder-voting standards are unfair is a strong reason for the court to fast-track the case.

Michael Dell, in a statement to the company's shareholders last month said he believes that taking Dell private is "the right thing" to do, adding, "Dell needs to transform, and we need to do it quickly."

Dell said in July that he would continue to be the CEO of the company he founded almost three decades ago, in 1984, even if his buyout plan fails, and that he would continue to fight Icahn, who has said that the PC-maker needs a new chief executive.


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