Dell, Inc. (DELL: Quote) has reached Tuesday an agreement with activist investor Carl Icahn for limiting the his stake in the beleaguered personal computer maker to 10 percent.
A special committee reporting to Dell's board expects the deal to help produce a superior proposal from Icahn while also protecting shareholders against potential accumulation of an unduly influential voting interest.
In return, the agreement provides Icahn entities a limited waiver under Section 203 of the Delaware General Corporation Law which facilitates Icahn's ability to engage with other Dell stockholders.
However, Dell, which agreed in February to be taken private in a $24.4 billion deal, say Icahn cannot make any deals with other shareholders who together would collectively own more than 15 percent of Dell's shares.
The agreement was struck after Icahn received approval on April 10 against a filing for early termination of the waiting period under the HSR Act made on March 15 with the U.S. Department of Justice and the Federal Trade Commission to permit the acquisition of up to 25 percent of Dell's outstanding shares.
Dell noted that the agreement with Icahn will expire when the Michael Dell/Silver Lake Partners transaction is finalized or a superior bid is accepted. The deal would also expire on January 15, 2014.
Round Rock, Texas-based Dell had agreed in early February to be taken private in a $24.4 billion deal by its founder, Chairman and CEO Michael Dell in partnership with private-equity firm Silver Lake Partners. The deal is expected to close before the end of the second quarter of Dell's fiscal year 2014.
Meanwhile, Dell had in late March confirmed receipt of two non-binding alternative bids from a consortium led by private-equity giant Blackstone Group, L.P. (BX: Quote) as well as a group led by Icahn's Icahn Enterprises (IEP: Quote) before the 45-day go-shop period concluded on March 22.
Icahn offered to acquire 58.1 percent of Dell at $15 per share in cash, while the Blackstone-led consortium, including Francisco Partners LP and Insight Venture Partners LP, have indicated a cash and stock offer in excess of $14.25 per share for a part of Dell in a leveraged recapitalization deal.
Both the bids provide shareholders who wish to participate in the ongoing upside of the company the opportunity to remain invested, with Dell continuing to be publicly traded on the Nasdaq.
If either of the rival bids are accepted, it is required to provide at least four business days notice to Michael Dell and Silver Lake to top it with a superior offer. However, according to an agreed deal, they can only make one bid to top either of the two rival bids, and will not be able to make a second sweetened offer.
It could also see Michael Dell lose control of the company. However, he has confirmed his willingness to explore in good faith the possibility of working with third parties regarding alternative acquisition proposals.
The strength of Michael Dell offer is his participation and his decision to roll over his 15.6 percent stake to help finance the deal. However, Blackstone has been reportedly wooing Oracle Corp. (ORCL) President Mark Hurd or former Compaq CEO Michael Capellas to run the company if their plans to rope in Michael Dell fails.
Dell has fallen out of favor in recent years, struggling with lower sales for desktops and laptops as consumers switch over to tablet PCs such as the iPad from Apple Inc. (AAPL). In order to drive growth and remain competitive, Dell resorted to acquisitions, cut thousands of jobs and closed plants.
In Tuesday's regular trading session, DELL is currently trading at $14.12, up $0.08 or 0.57% on a volume of 0.45 million shares. In the past 52-week period, the stock has been trading in a range of $8.69 to $16.61.
by RTT Staff Writer
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