Icahn Agrees To Cap Dell Shares For Shot At Better Dell Bid


Carl Icahn and his affiliate organizations have agreed to limit the amount of Dell shares they will purchase in exchange for an opportunity to more easily pursue improved offers to acquire part of Dell as that company moves to become a private entity.

Dell, in a Tuesday SEC filing from the special committee set up by the company's board of directors, said that Icahn and his affiliates agreed to not "make purchases that would cause them to own more than 10% of Dell's shares."

Corporate takeover specialist Icahn, who according to the Wall Street Journal currently owns 5 percent of Dell, and his affiliates also agreed that they would not enter into agreements with other investors that would collectively own more than 15 percent of Dell's shares.

[Related: Dell Considered PC Business Spinout, Financial Services Disposal]

Dell is in the process of becoming a private company as a way to reorganize its business with more of an enterprise focus and diminish its stake in the falling PC market. By going private, it can make changes without the scrutiny of investors.

Icahn and his affiliates last month proposed a bid for Dell under which they would own 24.1 percent of outstanding shares, Southeastern Asset Management 16.6 percent, T. Rowe Price 9.3 percent, and remaining public shareholders 50 percent.

In unveiling the agreement, the board's special committee wrote that Icahn's March bid is a superior proposal to the original February $24.4-billion proposal to take Dell private put forth by Dell CEO Michael Dell and his partner, private equity firm Silver Lake Partners.

The new agreement, however, gives Icahn the potential for making an even better proposal while heading off concerns that he might gain too much voting power, the special committee wrote in the SEC filing.

"The Special Committee believes that granting the limited waiver to Mr. Icahn while capping his share ownership will maximize the chances of eliciting a superior proposal from Mr. Icahn while at the same time protecting shareholders against potential accumulation of an unduly influential voting interest," the special committee wrote.

The agreement limiting the influence of a single person or entity such as Icahn and his affiliates is reassuring to Steve Wright, owner of Wright Business Technologies, a Houston-based solution provider and Dell partner.

"I believe in capitalism and in the desire of a company to stay in business," Wright said. "If a company is privately held, it will do what it needs to do to be more successful, not less. If someone gets too much power and made bad decisions, it could be bad for the business."

Wright said it is interesting to watch the historic process of taking Dell private. "As a public company, Dell needs to answer to shareholders," he said. "So I have no reason to be against it [going private]."

PUBLISHED APRIL 16, 2013