Judge Refuses to Fast-Track Icahn's Claim Against Dell

SAN FRANCISCO, CA - OCTOBER 18:  Dell CEO Michael Dell speaks during the 2011 Web 2.0 Summit on October 18, 2011 in San Francisco, California. The 2011 Web 2.0 Summit features keynote addresses by Internet and Technology leaders and runs through Wednesday.  (Photo by Justin Sullivan/Getty Images)
Justin Sullivan/Getty ImagesDell founder and CEO Michael Dell

WILMINGTON, Del. -- A Delaware judge Friday dealt a blow to activist investor Carl Icahn's effort to stop CEO and founder Michael Dell's $24.8 billion buyout offer for the struggling computer maker.

He refused to fast-track proceedings on Icahn's claims that Dell Inc. (DELL) directors have betrayed their duties to shareholders in trying to win support for Michael Dell's bid.

After three delays, Dell's board has scheduled a special shareholder vote on Michael Dell's offer for Sept. 12, followed by an overdue annual meeting on Oct. 17.

Icahn, who is seeking to oust Michael Dell as CEO, wanted the vote and annual meeting to be held on the same day. That would give shareholders a chance to vote on a rival board slate he is offering as part of his proposal, which he says would be a better deal for Dell shareholders.

Icahn claims that delaying the annual meeting until October could torpedo his financing plans for his proposal and is part of a deliberate effort to thwart his competing bid. He also argues that Dell directors have unfairly favored Michael Dell by moving up the investment date that makes a shareholder eligible to vote and by counting only votes, excluding those controlled by Michael Dell's group, that are actually cast. Under a previous deal condition, shareholders who did not vote were counted as being against Michael Dell's buyout.

Icahn argues that the changes were made to favor the buyout's prospects and win votes from short-term investors looking for a quick profit. But Chancellor Leo Strine Jr. said Friday that Icahn has offered no justification for an expedited hearing on what the judge indicated were dubious claims, and no evidence that the special committee of Dell directors supervising the proposed deal has not acted independently or in good faith.

Strine also noted that Icahn has continually revised his alternatives to Dell's buyout offer without making a firm superior bid, while the special committee has extracted an additional 23 cents per share from Dell and his main ally, private equity firm Silver Lake Partners, bumping up their offer to $13.75 per share plus a 13-cent special dividend. He also noted that the termination fee due to Dell and Silver Lake if a competing bid is successful has been reduced from $450 million to $180 million.

"That's pretty good math," said the judge, who described Icahn's fiduciary duty arguments as "an adjectival assault that doesn't have nouns and verbs that add up to colorable claims." A colorable claim is one that could be valid.

Strine said Dell shareholders can reject Michael Dell's buyout offer if they think it is inadequate and approve Icahn's slate of directors in October if they think that is in their best interests.

"A couple of weeks can hardly be a deal breaker," he said.

But the judge noted that under Delaware law, he was required to set a hearing on the issue of Dell's overdue annual meeting. The law requires a meeting within 13 months of the previous year's gathering, a deadline that expired this week. The law allows a judge to set a date for an annual meeting in such situations, but Strine indicated that the Oct. 17 date falls within a reasonable range of dates that the court might set itself, based on previous cases.

Strine suggested that he simply make the Oct. 17 date a court mandate, which would prevent delays by Dell's board.

"I find it difficult to understand how the court would order a meeting much in advance of the one the board has already set," Strine said. "The court is not going to be drawn into a tactical game whereby it tries to advantage one party or another."

The judge told attorneys that if they don't agree with his proposal, he would hold an expedited hearing regarding the annual meeting date later this month or early next month.

Dell on Thursday reported a 72 percent drop in second-quarter earnings, results that could make the buyout offer more attractive to worried shareholders.

On Friday, Icahn filed a preliminary proxy statement with the slate of directors he will propose at the annual meeting if shareholders reject Michael Dell's buyout offer.

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I run 30+ Dell Inspiron desktop computers in my business and they shine like a bright star to me. We don't need to do any custom orders and just order them as is. Although we do order MS Office and Adobe Acrobat with them. Just received 2 this past week to replace a couple of aging ones and plan on ordering 4 more very soon. Great job Dell.

August 18 2013 at 7:45 PM Report abuse rate up rate down Reply
1 reply to raprap007's comment

I have had very good luck overall, with my Dells, as well.

August 19 2013 at 2:24 AM Report abuse rate up rate down Reply

Good old Chainsaw Ichan wants to destroy another companyand destroy peoples lives all to make a few million more...

August 18 2013 at 7:26 PM Report abuse rate up rate down Reply

Dell is not the same company it was in the past. They are selling computers that do not work. They worked on mine for nearly two years and couldn\'t get it working. Finally they sent me a replacement which is not much better. A lot of my time is spent having Dell take control and try to make it work. GM can send a message to Dell. If you can\'t provide quality to the customer you will be in serious trouble.

August 18 2013 at 7:23 PM Report abuse rate up rate down Reply
Bill Palazzo

Just another Judge creating more problems. Ignore him

August 18 2013 at 4:02 PM Report abuse -1 rate up rate down Reply
Kelli J. Brewer

All I can say is I hate Dell & I will "NEVER EVER" own another Dell computer in my entire life. I ordered it over the phone with Dell directly & it was a piece of S#it from the day I took it out of the package. I in time bought a brand new all in one HP desk top & my printer is an all in one HP as well. I have never ever had a problem with HP & I will go & stay with HP forever. I look forward to the day when Dell & Wal Mart both go UNDER!!!!!!!!

August 18 2013 at 3:49 PM Report abuse +1 rate up rate down Reply

My PC is a Dell. It's worked flawlessly since I've had it. I took the side cover off of it and it is a solid design - well planned and no bandaids. I vote with Mr. Dell.

August 18 2013 at 3:20 PM Report abuse +1 rate up rate down Reply

Icahn's taking over DELL would result in a disaster similar to Eastern Airlines who he drove into bankruptcy while making hundreds of milllions for himself. He is part of the reason this country is in economic shape it's in today.

August 18 2013 at 2:51 PM Report abuse +5 rate up rate down Reply

before icahn sticks his fingers into any pie, he needs to clean up the eyesore he owns on the las vegas strip--the fountainbleau.

August 18 2013 at 1:47 PM Report abuse +3 rate up rate down Reply

could be wrong but I don't see a bright future in Dell. I recently reviewed their current offerings. I was stunned by the lack of customability (had owned a Dell XPS 8300). considering the turbulance at the company, the lack of customability, and the PC market in general I and probably many other will hold off buying their products until things are resolved. BTW Lenovo offer greater flexability in product selection and customization. However, I find that both companies offer only a low wattage PSU which makes upgrading with a medium or high end video card expensive if not impossible.

August 17 2013 at 7:00 PM Report abuse rate up rate down Reply

Ichan is a job and company killer. Worse than a cancer, a through and through parasite who exists only to kill off a company and claim the assets as his own.

If you don't think so, ask a former employee of Eastern Airlines or TWA. A true schum bago who cannot justify his place in an ethical business world.

August 17 2013 at 1:15 PM Report abuse +7 rate up rate down Reply
1 reply to Joey's comment

Yes indeed he also destroyed OMC Johnson and Evinrude outboards. Sold tooling and designs to Yamaha and Honda and when he couldn't bleed them anymore sold the brands to Bombardier of Canada. It's a damn shame that the only U.S. Marine power company is Mecury nowadays.

August 18 2013 at 7:29 PM Report abuse +2 rate up rate down Reply