Icahn seeks to fast-track his Dell lawsuit

Activist investor Carl Icahn will ask a Delaware court on Friday to fast-track his lawsuit against Dell Inc, a key thrust in his months-long effort to derail CEO Michael Dell's controversial $24.8 billion offer to buy and take private the No. 3 PC maker.

Icahn is trying to accelerate the timeframe on his lawsuit, hoping to head off a September 12 special shareholders' vote on a takeover proposal that the hedge fund billionaire and other major investors argue severely undervalues the company.

(Also see: Icahn sues Dell in latest attempt to foil buyout)

The conflict adds more uncertainty to a company that once ruled the global PC market, but is now trying to move into the relatively unfamiliar field of enterprise computing services as mobile devices pummel sales of computers and laptops.

Icahn, who wants to install his own directors on the board and oust the founding CEO, argues that Dell Inc and a special committee overseeing the takeover are short-changing investors.

Dell marks the latest board skirmish for the 77-year old New York investor, who specializes in buying stakes in companies in flux and agitating for change. He has recently had run-ins with management at Biogen and Transocean Ltd.

Icahn holds 8.9 percent of Dell Inc, making him the second-largest shareholder behind Michael Dell, with about 16 percent. He wants the company to convene an annual general meeting at the same time it convenes the special vote, since it guarantees a best and final offer from the CEO and his partner, Silver Lake.

That would also delay the special vote, buying Icahn time to nominate his own slate of board directors before a shareholder decision on the buyout offer is taken.

On its part, Dell argues its special committee has done everything it can to safeguard shareholders' interests, and has said the decision to hold the annual general meeting on October 17 means it will occur swiftly after the special vote.

Meanwhile, the company's fundamentals continue to deteriorate. On Thursday, it reported a 72 percent plunge in second-quarter earnings, reflecting the worsening plight of its PC business as well as the questions surrounding its future as a public company.

Platonic guardians?
Icahn's legal team said in court papers that the question before the court is "whether our law will allow these directors to act as Platonic guardians, repeatedly refusing to take 'no' for an answer on the merger, stacking the cards in its favor and deliberately postponing the annual meeting."

Icahn also wants Dell Inc to reverse its decision to nullify abstentions from the buyout offer's vote count, reverting to treating them as opposing votes. Such a move is negative for the CEO's camp, which estimates almost a quarter of eligible shares will abstain from voting.

Friday's courtroom drama is a facet of a months-long battle waged between Michael Dell, who wants to overhaul the company he created in college in 1984 away from the investor spotlight, and major shareholders like Southeastern Asset Management who want a higher price.

The CEO and Silver Lake have already sweetened their offer. On August 2, they delivered what they called their final offer, a special dividend of 13 cents a share on top of a 10-cent increase in the sale price to $13.75 per share, worth $24.8 billion in all.

Leo Strine, the judge on the case, has already considered requests to expedite class actions over the Dell buyout. In a hearing on June 19, he found the board had done enough to protect shareholders. But things have changed since, including the decision not to take abstentions into account.

Strine had cited that as a protection for shareholders.

Also, Dell has now gone 13 months without an annual meeting, which under Delaware law gives shareholders a right to sue to force a meeting. That gave Icahn the opening to ask Strine to move the two meetings to the same day.

(Also see: Dell takeover battle: All you need to know)

© Thomson Reuters 2013