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Strine Rejects Quick Trial
For Dell Plaintiffs
By Liz Hoffman
Law360, New York (June 21,
2013, 3:35 PM ET) -- A Delaware judge has rejected a motion for a quick
trial in litigation challenging the $24.4 billion buyout of
Dell Inc., appearing sympathetic to the argument that buyers Michael
Dell and Silver Lake have done everything right so far.
Chancellor Leo E. Strine, Jr. seemed skeptical of plaintiffs' claims that
the deal, which is set to go before a shareholder vote July 18, includes
protections that would hobble a competing bidder. Rather, he said, the
company's board took steps to encourage a higher offer, and suggested the
plaintiffs have an uphill battle ahead of them.
“Not only was there a post-signing market check … but there was, in fact,
an active look at other potential private equity sponsors,” the chancellor
said in a court conference Wednesday. “I do not see any plausible,
conceivable basis in which to conclude that it is a colorable possibility
that you could deem the choices made by this board to be unreasonable with
all the different safeguards."
Nineteen Delaware class actions are challenging the deal, in which Dell's
founder and private equity partners are seeking to acquire the company for
$13.65 per share. The complaints, consolidated in front of Chancellor
Strine, accuse Dell's board of breaching its duties by agreeing to a
lowball price and deal protections that discourage a topping offer.
This week, plaintiffs attorney Joe Rice — best known for his role in the
landmark $200 billion tobacco settlement in 1998 — filed with the court a
letter from investor Carl Icahn, who is trying to thwart the buyout and
push an alternative transaction of his own.
In the letter, Icahn said the deal's protections virtually guarantee that
no bank would lend to a rival bidder. Icahn's inability to shore up
financing has been an impediment to Dell's board seriously considering his
proposal, which calls for Dell to borrow some $5 billion and buy back
shares or pay a special dividend.
But the chancellor appeared skeptical. The deal's
low breakup fee — $180 million if Dell goes with a better
offer, or $450 million if the deal is voted down for any other reason — is
actually below market norms. And Silver Lake's single matching right is
fair, the chancellor said.
“Boards are entitled to give reasonable contractual inducements in their
pursuit of high value,” he said. “And as long as there are reasonable
attempts to maximize stockholder value, this court is not entitled to
intrude.”
And the special committee wrung several concessions out of Michael Dell
and Silver Lake, he noted. Among them: Michael Dell's promise to vote his
shares in favor of a higher bidder, a go-shop period that allowed
Blackstone Group LP and Carl Icahn to conduct due diligence and an
offer by Dell to
reimburse Blackstone's and Icahn's expenses.
The chancellor also had some harsh words for Icahn, who has not joined the
litigation.
Icahn's
latest plan, unveiled Tuesday, does not appear to meet the
definition of a “superior proposal” under the Silver Lake merger
agreement, and the billionaire does not yet have a bank lined up to
provide the debt required to fund a $16 billion share buyback. Sources
close to Icahn confirm he is working with Jefferies & Co. Inc. to secure
as much as $1.6 billion in financing, and Icahn himself has agreed to
furnish up to $2 billion.
“We're supposed to gin up expedited proceedings when the bidder … has
expressly eschewed pushing further for a superior proposal and is not
responding to the special committee's request for information by saying
it's in an impossible position to do so,” the chancellor sad, summing up
Icahn's position so far as, “I can't give you assurances about
[financing], but trust me, the financing is easily available.”
That's the same argument made so far by Dell's special committee, which
has
pushed Icahn for more details.
The plaintiffs are represented by co-lead counsel at
Grant & Eisenhofer PA, Bouchard Margules & Friedlander PA,
Bernstein Litowitz Berger & Grossmann LLP,
Kessler Topaz Meltzer & Check LLP and
Robbins Geller Rudman & Dowd LLP.
Barrack Rodos & Bacine and
Motley Rice LLC are serving as the executive committee for the
plaintiffs.
Dell is represented by
Hogan Lovells, with
Seitz Ross Aronstam & Moritz LLP and
Alston & Bird LLP serving as litigation counsel. Its special committee
is represented by
Debevoise & Plimpton LLP and
Morris Nichols Arsht & Tunnell PA. Its other independent directors are
reprsented by
Richards Layton & Finger PA.
Michael Dell is represented by
Wachtell Lipton Rosen & Katz and
Potter Anderson & Corroon LLP. Silver Lake is represented by
Simpson Thacher & Bartlett LLP and
Young Conaway Stargatt & Taylor LLP.
The case is In re: Dell Shareholder Litigation, number 8329-CS, in
Delaware Court of Chancery.
--Editing by Chris Yates.
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