Wall Street Play’a

Posted by Rick Bekkering

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Wall Street play’a

“Straight out of Compton” Not really, more like straight out of Queens NY! Carl Celian Icahn (born February 16, 1936) is an American businessman and investor. He is the majority shareholder of Icahn Enterprises . Carl’s family name was Jewish in name, but his father was a “dogmatic atheist”, also a frustrated opera singer who settled on being a cantor (lead worship in the Jewish community)and eventually a teacher. His mother also worked as a schoolteacher. He graduated from Princeton University with a Bachelor of Arts degree in philosophy in 1957 and then joined New York University School of Medicine, but he dropped out after two years to join the army.


Carl made headlines in 1985 with his ruthless take-over of TWA and set the stage for his role as a vicious and often malicious corporate raider. This Asset stripping model became his modus operandi for corporate take-overs to come. Buy a company and sell the parts to pay the bill. Countless deals and billions of dollars latter Carl is front and center in his efforts to take Michael Dells DELL Computer. Well today he gave up that battle. Below is his letter of resignation or submission of defeat.


Dear Fellow Dell Inc. Stockholders:


I continue to believe that the price being paid by Michael Dell/Silver Lake to purchase our company greatly undervalues it, among other things, because:



Dell is paying a price approximately 70%   below its ten-year high of $42.38; and



The bid freezes stockholders out of any   possibility of realizing Dell’s great potential.


Although the board accepted Michael Dell/Silver Lake’s offer in February, it promised stockholders that the Company would hold a meeting at which stockholders could make the final decision as whether or not to accept the transaction.  The board recommended that stockholders vote in favor of the proposed transaction because it was Michael Dell/Silver Lake’s “best and final offer”.  Icahn and Southeastern argued that stockholders should not give up the huge potential of Dell and therefore should reject the proposed transaction.  We won, or at least thought we won, but when the board realized that they lost the vote, they simply ignored the outcome.  Even in a dictatorship when the ruling party loses an election, and then ignores its outcome, it attempts to provide a plausible reason to justify their actions. Andrew Bary at Barron’s wisely observed, “In an action worthy of Vladimir Putin, Dell postponed a vote scheduled for last Thursday on Michael Dell’s proposed buyout of the company when it became apparent that there was insufficient shareholder support for the deal.”  But the Dell board felt they needed no excuse when they changed the voting standard and changed the record date of those eligible to vote, which allowed arbitrageurs to vote a much greater percentage of the stock when the polls reopen and scheduled the annual meeting for October. The board simply relied on the usual “business judgment” catchall and Delaware law to uphold their actions.  We jokingly ask, “What’s the difference between Dell and a dictatorship?” The answer: Most functioning dictatorships only need to postpone the vote once to win.


As a result of 1) the change in the record date allowing new stockholders to vote on the proposed Michael Dell/Silver Lake transaction on September 12th, 2) Chancellor Strine’s ruling that a gap period between the September 12th meeting and the annual meeting was legal under Delaware law and 3) the raise in the bid by Michael Dell/Silver Lake, we have determined that it would be almost impossible to win the battle on September 12th.. We have therefore come to the conclusion that we will not pursue additional efforts to defeat the   Michael Dell/Silver Lake proposal, although we still oppose it and will move to seek appraisal rights.


I realize that some stockholders will be disappointed that we do not fight on.  However, over the last decade, mainly through “activism” we have enhanced stockholder value in many companies by billions of dollars.  We did not accomplish this by waging battles that we thought we would lose.  Michael Dell/Silver Lake waged a hard fought battle and according to Chancellor Strine, the actions by Dell were within the Delaware law.  We therefore congratulate Michael Dell and I intend to call him to wish him good luck (he may need it).


While we of course are saddened at our losing the battle to control Dell, it certainly makes the loss a lot more tolerable in that as a result of our involvement, Michael Dell/Silver Lake increased what they said was their “best and final offer”.  As a result of this increase all stockholders are to receive many hundreds of millions of dollars more than the board originally accepted. We will never know how much more stockholders might have received if the board had allowed the annual meeting to proceed at the same time as the rescheduled special meeting which we believe would have put pressure on Michael Dell/Silver Lake to increase their bid.


One of the great strengths of our country is that we abide by the rule of law.  However, state laws dealing with corporate governance often favor incumbent corporate boards and management and are weak in many areas.  While we must abide by these laws, we believe that they can and must be changed.  Among many other things, boards should not be able to treat elections as totalitarian dictatorships do; where if they lose, they simply ignore the results.


The Dell board, like so many boards in this country, reminds me of Clark Gable’s last words in “Gone with the Wind,” they simply “don’t give a damn.” If you are incensed by the actions of the Dell Board as much as I am, I hope you will choose to follow me on Twitter where from time to time I give my investment insights.  I also intend to point out what I consider to be unconscionable actions by boards and discuss what remedies shareholders may take to change the situation.


I wish to take this opportunity to thank all Dell shareholders who supported Southeastern and Icahn.


Very truly yours,


Carl Icahn”