Carl Icahn urges Dell shareholders to get shares appraised in Delaware Court

Days after three proxy advisory firms backed Michael Dell's $24.4-billion bid for struggling personal computer maker Dell Inc., activist billionaire investor Carl Icahn yesterday urged the company shareholders to seek an appraisal of their shares.

Icahn, along with Southeastern Asset Management, who together hold nearly 13 per cent in Dell, have been opposing the $13.65 per share offer from company founder Michael Dell and private equity firm Silver Lake Partners, arguing that they were attempting to buy the world's third-largest PC maker at a steep discount.

Icahn, on his part, has put forth three alternate proposals, including buying nearly two-thirds of Dell's stock for$14 per share. His latest move appears to be a last-ditch attempt to somehow thwart Michael Dell from walking away with the company he founded in 1984.

Icahn's call for appraisal has come a few days after three proxy advisory firms - Shareholder Services, Glass Lewis and Egan Jones - backed Michael Dell's offer and recommended to shareholders they accept the deal rather than risk further exposure to a deteriorating PC market.

In its second quarter PC shipments report released yesterday, technology research firm Gartner said that global sales of PC's have fallen for the fifth quarter in a row, making it the "longest duration of decline" in history. (See: PC sales fall for the fifth consecutive quarter: Gartner).

This is definitely not good news for shareholders who oppose Michael Dell's bid since he has often said that he would like to restructure the company away from the critical eye of Wall Street by cutting costs and jobs, diversifying into the more profitable data storage and enterprise software business.

In his letter to fellow shareholders, Icahn, who has accumulated 8.7 per cent stake in Dell, wrote, ''If you seek appraisal, you will receive more.''

The activist investor plans to ask a court in Delaware, where Dell is incorporated, to assess whether Michael Dell and PE firm Silver Lake's $24.4-billion offer represents a fair price.

But shareholders would first have to vote on 18 July against Michael Dell's offer, elect a new slate of directors put forward by Icahn, and then approach the Delaware court seeking an appraisal of the true value of their shares.

Michael Dell's bid requires to be backed by little more than 42 per cent of the company's outstanding stock, since he is the largest shareholder with nearly 16 per cent stake, and which will be excluded from the count, but eligible to vote against any of Icahn's proposal.

Icahn has informed shareholders that they have a 60-day period in which to demand appraisal rights, and then withdraw the request and accept the $13.65-a-share offer. ''To add a new twist to an old saying, 'you can have your cake and eat it too,' '' he said in his letter.

But seeking an appraisal, although a clever ploy, has its inherent risk also. The court could not only say that the offer is low or award just the $13.65 a share, but can even appraise it lower than the offer price.

Analysts say if shareholders vote against Michael Dell's offer, then seeking an appraisal does not come into play, but consortium backing him could lose the $750-million breakup fee, while shareholders will see Dell's stock crash to below $10 a share.