THE WALL STREET JOURNAL.
up-to-the-minute take on deals and deal makers
2013, 3:21 PM
Dell Battle Could
Linger Even With Icahn
It is unclear what power Carl
wield in the battle to win shareholder votes at Dell Inc.
He has not yet disclosed his stake in the company, describing it only as
“substantial.” Already, about 15% of Dell’s shareholders, including
Southeastern Asset Management and T. Rowe Price Group, have publicly stated
their opposition to the current proposal. Still, another 30% or so of Dell’s
remaining holders, excluding Mr. Dell and his 16% stake, are needed for a
majority to defeat or approve the deal.
Southeastern provided a detailed analysis last month that argued that Dell
is worth closer to $24 than $13.65. Some say that now, Mr. Icahn and his
larger-than-life presence, bolstered by his many media appearances and
forceful language, could serve to rally undecided voters against the
“Southeastern started everyone’s thinking with some very professional
analyses of possible financial alternatives, and now Icahn has taken it a
step further and presented his own very clear proposal of something
investors can specifically compare with Dell’s proposal,” said Gary Lutin,
chairman of The Shareholder Forum, an organization that works with companies
and investors, and has requested access to the information used by Dell’s
board to evaluate the buyout deal.
Even so, the outcome of the battle for votes may not become clear for
several months. Active investors such as Mr. Icahn and Southeastern only
represent a small portion of Dell’s shareholder base. The largest block of
Dell holders are the passive index mutual funds and exchange-traded funds
that own the stock only because it is constituent of indices like the S&P
500. About 18% of Dell Inc. shares were owned by passive index funds at the
end of last year, according to an analysis of the most recent filings by
Ipreo, a capital markets data and advisory firm.
These funds typically wait until months after an agreement is struck to
begin deciding how to vote, as the official paperwork is sent for regulatory
approval. Many of them follow the advice of firms like Institutional
Shareholder Services and Glass Lewis & Co., which are paid by institutions
to recommend how to vote on proxy matters, such as the election of
directors, executive pay, and proposed mergers. These firms are not expected
to issue their analyses until the vote is officially called, which would be
after an SEC review of the filing of proxy proposals.
Increasingly though, ETFs and index funds have been under pressure to
develop independent views as well, which could make their votes more
difficult to predict.
“Index funds can be the toughest to read, but they will be a key swing
vote,” said Brad Allen, director of Branav Shareholder Advisory Services
Inc., which works with boards to evaluate how shareholders will vote in a
Some shareholders have already voted by selling their shares to people like
Mr. Icahn or other merger arbitrage traders, or “arbs,” betting that the
deal does or does not go through.
“We thought the [proposed buyout] deal would go closer to $15 [a share],”
said Joanna Shatney, head of U.S. large-cap equities at Schroder Investment
Management North America Inc. But Ms. Shatney said that rather than fight
for more, the fund she managed was selling down its small Dell stake,
because “we don’t see a number of other suitors” who could offer a better
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