Icahn Accuses Dell Board of Trying to Frighten Shareholders
With the vote over a proposal to go private coming this Thursday, activist investor Carl Icahn offered another of his open letters to shareholders of Dell, accusing the company’s board of trying to “frighten” its investors throughout the process of the transaction.
Today, the issue was the timing of the meeting of shareholders on July 18, and the regular annual meeting of shareholders that is expected later, at which Icahn is bringing a proxy fight for control of the company. The special committee of Dell’s board, Icahn said, is trying to scare Dell shareholders that the value of their shares will fall significantly if they fail to approve the go-private transaction.
He also criticized the prospect of a prolonged proxy fight as another scare tactic. Given a chance to vote on a new board, he said, shareholders would gladly throw out the entire old board, given its “abysmal record.” What Icahn neglects to mention, however, is that Michael Dell will be allowed to vote his 16 percent of shares, something he is prevented from doing on the go-private proposal.
That makes it unlikely that Icahn and his sympathizers — unless there’s a significant block of shareholders who are silently backing him — can elect the full slate of directors they said they want. That raises the possibility of a mixed board with competing loyalties that gets very little done.
Expect a few more of these letters from Icahn before Thursday’s vote.
The full text of Icahn’s letter is below:
Dear Fellow Dell Stockholders:
It seems to me that the Dell Board has shamelessly attempted to frighten stockholders throughout this process. But the scary facts they bring up are often the result of Dell’s own actions. They tell us about the profitable PC market drastically declining and point to their quarterly numbers. But they neglect to point out the reduction in margin is of their own doing because they have, of their own volition, lowered prices which obviously have drastically reduced margins. But even Dell’s own management believes this is temporary.
Another scare tactic of Dell is to tell stockholders that if you vote down the freeze out bid of Michael Dell/Silver Lake there is risk the stock price will drop because of the “gap period” between July 18 and the proxy fight at the annual meeting. But this is simply another blatant obfuscation of the facts because they neglect to inform you that the law requires that they hold a stockholder meeting by August 14. As cynical as I am about the Dell board, I do not believe that even this board will violate the law and push that meeting out over the objection of stockholders, in order to help Michael Dell. Therefore, if the Michael Dell/Silver Lake proposal is voted down I believe that despite the scare tactics the annual meeting will be held very promptly.
I should like to diffuse another scare tactic of Dell’s. The company will tell you that if Michael Dell/Silver Lake’s offer is turned down, Icahn might still lose the proxy fight at the annual meeting. But this is nonsense because it makes no sense to believe stockholders will vote to elect the current board with their abysmal record and turn down our recap offer of $15 to $18 per share unless the current board makes a superior recap offer. If that occurs, it will be a pleasant choice for stockholders.
It is also pure conjecture for the board to tell you that you will receive Dell’s $13.65 sooner than you will receive the cash from our recap because even Dell admits their own transaction will close sometime in October. Actually, there is more risk to the Dell deal than that because if China does not provide its approval by November, Michael Dell/Silver Lake can abort the Dell transaction without paying any penalty.
Carl C. Icahn
Icahn Enterprises LP