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Michael Dell vs Carl Icahn Michael Dell vs Carl Icahn Featured

Founder Michael Dell’s plans to privatise the company are in trouble. There will be a shareholder vote tomorrow on whether the US$24.4 billion plan will proceed.

When the plan was announced it seemed a formality. A rival bid from legendary investor Carl Icahn emerged, but no-one took it too seriously – at first. Now it looks like Icahn could derail the whole thing, with a counter-bid that would give him a higher stake and keep the company public.

Many major Dell investors have swung Icahn’s way in the last week, and results of the vote are no longer a foregone conclusion. Blackstone Group, an influential private equity firm that owns 4.4% of Dell’s stock, now supports the Icahn plan. Forbes magazine says that other major investors have followed suit, and that more than 20% of Dell shareholders are now publicly against the privatisation scheme.

Michael Dell owns 16% of the company he founded in a university dorm room in 1984, but he and his associates are not permitted to vote.

It would be the largest privatisation deal in IT history. It values each share at $13.65, a significant 37% premium over the average closing share price over the last three months. Shares went up after the deal was announced, but in a sure sign that things are not going well they have now dropped back to $12.76, their lowest in three months.

The Dell board unanimously approved the agreement, on the condition that there would be a vote of the unaffiliated stockholders. They expected these voters would fall into line. They have not.

The privatisation makes sense, to many at least. Dell lost nearly a third of its value last year as the epicentre of computing moved from Dell’s traditional strengths of PCs and servers to the mobile market. As a private company Dell could make technology investments and adopt strategies that would not be affected by the tyranny of watching the stock price and quarterly earnings figures.

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Graeme Philipson

Graeme Philipson is senior associate editor at iTWire and editor of sister publication CommsWire. He is also founder and Research Director of Connection Research, a market research and analysis firm specialising in the convergence of sustainable, digital and environmental technologies. He has been in the high tech industry for more than 30 years, most of that time as a market researcher, analyst and journalist. He was founding editor of MIS magazine, and is a former editor of Computerworld Australia. He was a research director for Gartner Asia Pacific and research manager for the Yankee Group Australia. He was a long time IT columnist in The Age and The Sydney Morning Herald, and is a recipient of the Kester Award for lifetime achievement in IT journalism.

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