With the vote on a proposed $24.4 billion sale of Dell Inc. just over a week away, the deal's primary opponent is trying a new tactic.
The activist investor Carl C. Icahn urged fellow Dell shareholders on Wednesday to start preparing appraisal rights for their shares. It's a somewhat uncommon move that could yield a higher payout than the $13.65-a-share that Michael S. Dell and the investment firm Silver Lake are offering.
That is, if the gambit is successful.
The call for investors to exercise their appraisal rights is in some ways a surprising shift for Mr. Icahn, who has pushed shareholders to reject the takeover bid. He and another big investor, Southeastern Asset Management, have called for replacing Dell's board with their own slate of directors, who would then push the company into buying back 1.1 billion shares at $14 each.
Despite winning the support of influential proxy advisers like Institutional Shareholder Services, advisers to the buyers and to a special committee of Dell's board are still concerned that they may lose the July 18 vote on the deal. While Mr. Icahn may have lost some negotiating leverage with the I.S.S. report, those people believe that the activist may still succeed in stirring up enough opposition with the promise of his buyback proposal.
Wednesday's announcement appears to signal that Mr. Icahn may be backing away from that plan.
Essentially, shareholders would need to vote against the leveraged buyout and then ask Delaware's court of chancery to “appraise†the true value of their shares. (The New York Times's Gretchen Morgenson previously wrote about appraisal rights in the Dell matter, and how some shareholders have been preparing to use them.)
Mr. Icahn cleverly points out that there is a 60-day period in which shareholders can demand appraisal rights, and then withdraw the request and accept the $13.65-a-share offer. “To add a new twist to an old saying, ‘you can have your cake and eat it too,'†he said in a statement.
Mr. Icahn is still urging shareholders to vote against the deal. But he is also betting that even if they win, Mr. Dell and Silver Lake will move to settle with dissident shareholders, paying them off to avoid years of potentially contentious court battles. In short, he's looking for a price bump.
He notes that the buyers are on the hook for a $750 million breakup fee if they can't close the deal under certain conditions, and questions whether the duo's lenders will seek to back away if shareholders seek appraisal rights en masse.
There is obviously an element of chance here, since the Delaware court may award just the $13.65 a share, or even less. Mr. Icahn clearly states in his news release that “those who seek appraisal may get lucky.â€
And if Mr. Dell's bid fails, appraisal rights don't come into play at all.
But for an investor who has thrown nearly every possible hurdle he can to halt the deal - or at least to force a higher payout - appraisal rights may pay off after all.
