Law360, New
York (October 04, 2013, 12:37 PM ET) -- Carl Icahn on Friday
laid down the last of his arms in his fight against
Dell Inc.'s $25 billion buyout, dropping his demand for
appraisal on more than 150 million shares and agreeing to take
the $13.75-per-share merger price.
The billionaire investor broke the news on his new favorite
outlet,
Twitter, and later followed up with a regulatory filing.
"I withdrew my demand for appraisal of my Dell shares," Icahn —
who has used his Twitter handle, @Carl_C_Icahn, to
disclose market-moving news in recent weeks — said
in a Twitter post. "Based on our returns on capital, we believe
we have better uses for $2 billion."
The transaction, which will give CEO and founder Michael Dell
and buyout firm Silver Lake Partners a chance to turn around the
struggling technology company in private, is on track to close
before the end of the month, which is the end of Dell's fiscal
quarter. Shareholders
approved the buyout last month after
Delaware Chancellor Leo E. Strine Jr.
upheld the board's last-minute tweaks to the voting
rules and record date, all but ensuring the deal's passage.
Icahn's course reversal is surprising. The investor, who bought
into Texas-based Dell's stock after the deal was announced and
teamed for a while with disgruntled long-term shareholder
Southeastern Asset Management Inc., had
vowed a long fight. Even after he
withdrew his effort to thwart the deal by
running a slate of directors, he urged shareholders to pursue
their appraisal rights.
And the main drawbacks to appraisal actions — concerns about
liquidity, public reporting and valuation requirements, and
patience — seemed small obstacles for Icahn, whose net worth is
in the billions and whose campaign against Michael Dell has at
times veered into the personal.
Now, the appraisal banner will be carried by the Dell Valuation
Trust, a
novel effort
to essentially create a new, tradable asset class out of
appraisal rights. The trust is spearheaded by the Shareholder
Forum, an effort to educate investors about their rights, and
run by Gary Lutin, a former investment banker turned corporate
governance watchdog.
One plan is for Dell investors who think their shares are worth
more to pool their rights into the trust. those who want out
for any reason could sell their trust units, while arbitrageurs
or other, more patient investors could buy in. Lutin said the
trust will also manage options for investors who don't want the
publicity of a traded security, though the details are still
being worked out.
To establish enough marketability for the public-float option,
Lutin says the trust needs about 20 milion shares. It has lost
out on Icahn's 156 million, but likely has a big pool of shares
to draw from. Some 400 million shares were voted against the
merger, a prerequisite for demanding appraisal. It's not clear
how many of those shares have sent a letter to Dell declaring
their intentions — spokesman David Frink has repeatedly declined
to comment — but even half would leave more than twice the
number the trust is seeking.
Appraisal actions can't officially be filed until early March,
after the 120-day statutory window from the merger's effective
date expires. And they are notoriously unpredictable; the judge
could very well decide Dell, whose earnings have slipped
steadily since the deal was announced, is worth less than the
$13.75-per-share merger price.
But Lutin's group likes their odds; a
recent report
commissioned by the forum found that in only eight Delaware
appraisal cases in the past 20 years has a judge awarded less
than the merger price.
The Dell Valuation Trust is represented by
Bingham McCutchen LLP on
SEC regulatory issues and by
Fish & Richardson PC on appraisal matters.
--Editing by Katherine Rautenberg.