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.