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Michael Dell accuses Icahn of using court as takeover tool

Vulture capitalist ups his stake ahead of vote

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Michael Dell has accused Carl Icahn of filing "undefined" legal action solely as a tool to help him take over Dell, and said the investor was "grandstanding" in a bid to stop the company from going private.

In a court filing, Michael Dell said the action was "just another soapbox for Mr. Icahn's public spat," and a tactic intended to delay the vote on the future of the company, Bloomberg reports.

Last week Icahn filed a 21-page complaint in a Delaware court seeking to bring forward the company's annual general meeting (AGM) and to alter the rules to disallow some shareholders from voting with stock bought after the bid was announced in February.

The shareholder vote on Dell's and Icahn's proposals is scheduled for September 12, but the AGM isn't due until October 17. Icahn says this breaches company bylaws that AGM's must be held at least every 13 months (the last one was held in July last year). Holding the two together would require a delay in the shareholder vote, the Dell court filings state.

Regulatory filings by Icahn released on Monday show that the billionaire increased his investment in the company on the same day that he launched his latest legal attack. Icahn bought an additional four million shares on the open market, giving him 8.7 per cent of the company's stock.

He'll need every one. After the management buyout team led by Michael Dell raised its offer to $13.75 a share (with a one-off 13-cent dividend), the company's board changed the voting rules so that shareholders who declined to register an interest with either camp are not counted as opposing the move to take the company private.

It's estimated that the number of non-votes could be as high as 25 per cent of the total, so having that on one's side could be the key to swinging the final vote one way or another.

Icahn wants to keep the company public and is offering between $15.50 and $18 per share, depending on how the company makes out. His deal would be funded by using most of Dell's cash reserves, a lot of borrowing, and issuing a warrant to shareholders allowing them to buy Dell stock for $20 a share anytime in the next seven years, should the price rise that high again.

Michael Dell has said that Icahn's deal would hamstring the company, loading it down with debt and depleting assets needed to restructure the firm away from its traditional box-shifting business plan. He has pointed to Icahn's reputation as one of the original slash-and-burn corporate raiders, and predicted doom should he take over.

Icahn, for his part, claims he just wants value for money for stockholders, saying Dell is trying to buy back the company on the cheap. If the court action succeeds, he's expected to push for the installation of supportive board members to put the case forward for staying public. ®

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