(Corrects first paragraph to show Icahn's opposition campaign
is directed against the buyout)
By Dave Warner
WILMINGTON, Delaware, Aug 16 Activist investor
Carl Icahn's legal effort to derail a $25 billion takeover of
Dell Inc stalled after a judge refused to fast-track
his lawsuit against the personal computer maker, blunting an
integral part of his months-long opposition campaign.
Delaware Court of Chancery Judge Leo Strine on Friday waved
off Icahn's request to accelerate the lawsuit, dismissing claims
that the company and its board wronged shareholders by accepting
an undervalued offer from Chief Executive Michael Dell.
Icahn had hoped to head off a Sept. 12 special shareholders'
vote on a takeover proposal that the hedge fund billionaire and
other major investors argue cheapens the company. He wanted the
company to hold its annual general meeting - at which he intends
to try and replace the board - at the same time as the vote,
hoping that will force the CEO to put his best and final offer
on the table.
But Strine was dismissive of Icahn's argument that Dell Inc,
and the special committee formed to review the buyout offer, was
trying to push the CEO's deal at the expense of shareholders. He
opened the proceedings with a 45-minute reading of a prepared
opinion, and no lawyers from either side got the chance to
The broader conflict between CEO Dell and Icahn adds more
uncertainty to a company that once ruled the global personal
computer market, but is now trying to move into the relatively
unfamiliar field of enterprise computing services as mobile
devices pummel sales of computers and laptops.
Dell marks the latest board skirmish for the 77-year-old New
York investor, who specializes in buying stakes in companies in
flux and agitating for change. He has recently had run-ins with
management at Biogen and Transocean Ltd.
He holds 8.9 percent of Dell Inc, making him the
second-largest shareholder behind Michael Dell, with about 16
Dell argues its special committee has done everything it can
to safeguard shareholders' interests, and has said the decision
to hold the annual general meeting on Oct. 17 means it will take
place swiftly after the special vote.
"It is probably within the time the court itself might set,"
Strine said on Friday, referring to the meeting.
Under Delaware law, company annual general meetings have to
be held within 13 months of each other or shareholders could sue
to force one. Strine said an Oct. 17 date would be considered
overdue, but added it was not uncommon for corporations to hold
late shareholder meetings.
Lawyers for both sides did not respond to requests for
Icahn plans to use the October meeting to launch an assault
on Dell's upper echelons. The investor and Southeastern Asset
Management filed a preliminary proxy statement on Friday urging
investors to elect their slate of nominees to the board.
They include Rahul Merchant, New York City's chief
information officer; Jonathan Christodoro, managing director at
Icahn Capital; Icahn Enterprises President Daniel Ninivaggi, who
previously sat on the board of Motorola Mobility; and Harry
Debes, a technology veteran who is an operating partner with
buyout firm Advent International Corp.
Some of the conflict has centered on the company's worsening
fundamentals. On Thursday, it reported a 72 percent plunge in
second-quarter earnings that analysts say stresses the urgent
need for a serious business overhaul and shores up the
attractiveness of Michael Dell's offer.
But Southeastern, which holds about 4 percent of Dell's
stock, argued on Friday that the results showed a strong
increase in cash flows and robust growth in revenue from
enterprise software and services, supporting its case that the
company still had strong long-term prospects and that the CEO's
proposal thereby undervalued the company.
More immediately, Icahn has to make his case in court.
Icahn's legal team has said in court papers that the
question before the court is "whether our law will allow these
directors to act as Platonic guardians, repeatedly refusing to
take 'no' for an answer on the merger, stacking the cards in its
favor and deliberately postponing the annual meeting."
Icahn also wants Dell Inc to reverse its decision to nullify
abstentions from the buyout offer's vote count, reverting to
treating them as opposing votes. Such a move is negative for the
CEO's camp, which estimates that holders of almost a quarter of
eligible shares will abstain from voting.
Strine said on Friday he saw no evidence the company was
trying to rig the shareholders' votes.
Friday's courtroom drama was a facet of battle waged since
March between Michael Dell, who wants to overhaul the company he
created in college in 1984 away from the investor spotlight, and
shareholders like Southeastern Asset Management who want a
Michael Dell and Silver Lake have already sweetened their
offer. On Aug. 2, they delivered what they called their final
offer, a special dividend of 13 cents a share on top of a
10-cent increase in the sale price to $13.75 per share.
Dell's shares rose 0.8 percent to close at $13.82 on Nasdaq.
They had traded around $10 before news of the buyout offer
emerged in February.
(Additional reporting by Tom Hals in Wilmington, writing by
Edwin Chan, editing by Bill Rigby, Bernard Orr, Andrew Hay and