With Dell (DELL) shareholders set to vote July 18 at 8 a.m. Central time on founder Michael Dell’s and Silver Lake’s $13.65 per share offer to take the company private, rival bidder Carl Icahn late last week pitched stock owners on their “appraisal rights,” or what he termed a “a rare opportunity to make a profit without taking risk.”
According to Icahn, shareholders notifying Dell before the vote on Thursday of their objection to the price, and voting no on the offer, legally can pursue a higher per-share price—an appraisal—in court up to 60 days after the transaction is completed.
If Icahn was stung last week when Dell and Silver Lake gained the endorsement of proxy advisory firms Glass Lewis and Egan-Jones to go along with the earlier nod they received from ISS, he’s not showing it. In an open letter to shareholders, Icahn continued to argue that the per-share price of Dell’s and Silver’s Lake’s proposal undervalues the company and urged stock owners to opt for their “appraisal rights,” should they express dissatisfaction with the price.
“I believe that today a 'no-brainer' exists at Dell,” Icahn wrote. “This is because if you own Dell and opt for appraisal rights, you have a rare opportunity to make a profit without taking risk. Under the law, if you are dissatisfied with the price that you are being forced to take in a 'going private' transaction that you did not vote for, you can go to court for an appraisal.”
According Icahn, even if Dell’s and Silver Lake’s offer wins approval, shareholders opting for appraisal “will have until December to decide if you want the $13.65 or continue on with the appraisal process,” assuming the deal closes in October.
Icahn said he already had elected for appraisal on the 152 million shares he owns.
In response, Dell’s Special Committee cautioned shareholders that Icahn’s appraisal rights scenarios “misrepresent the risks and costs involved” and, in fact, “involves substantial risks and costs,” which it outlined with four talking points, in a statement. A sufficient number of shareholders voting against Dell’s and Silver Lake’s proposal with appraisal in mind might serve to defeat the proposal, the Committee argued, in which case “the merger will not occur, stockholders will not have the opportunity to receive the $13.65 per share cash merger consideration, there will be no appraisal rights, and stockholders will continue to bear the risks of holding their Dell shares.”
Um, isn’t that exactly what Icahn wants?
Then, there’s no guarantee that a court would rule the fair value of Dell’s shares is greater than the $13.65 offer, especially considering that price has been in the public view for six months without a higher offer showing itself. In addition, shareholders would have to underwrite court costs to pursue appraisal. And, the Committee debunked Icahn’s suggestion that buyers could settle appraisal claims with Dell for greater than the $13.65 per share price within 60 days, calling it “baseless” and contradictory to Dell’s proxy statement.
“Mr. Icahn is asking Dell stockholders to vote against the certainty of $13.65 per share in cash to pursue a highly speculative appraisal remedy. He is also asking them, if the merger does not occur, to cede full control of Dell’s board to nominees of the Icahn group and then to hope for a highly leveraged recapitalization transaction that he himself admits may never come to fruition,” the Committee said.
Thursday’s going to be an exciting day around Dell, isn’t it?