Team Icahn Has Dell On The Run

Not long ago, it seemed like billionaire investor Carl Icahn was isolated and defeated in his effort to kill the Michael Dell and Silver Lake $24.4 billion deal for Dell. The powerful Blackstone Group private equity firm dropped out of the race for the struggling PC maker and Icahn appeared to be having trouble getting the financing to mount a serious counter-proposal.

But on the eve of the shareholder vote on the Michael Dell buyout deal the number of major shareholders joining Icahn's team is growing and the effort to disrupt the deal looks increasingly credible. The special committee of Dell's board charged with evaluating what is in the best interest of shareholders, appears ready to delay the shareholder vote that is scheduled for Thursday in attempt to give Michael Dell more time to secure more shareholder support, maybe by increasing his bid for the company he founded. Michael Dell, however, has so far resisted efforts to get him to raise his offer for Dell.

In another sign that Michael Dell's deal is in trouble, Dell's stock keeps falling. Shares of Dell fell by 2% in Wednesday morning trading, changing hands for $12.76, their lowest since just after Michael Dell launched his effort to take the company private in January. Dell's stock is now down about 4% this week.

The latest big institutional investor to line up behind Icahn is Blackrock, which has a 4.4% stake in Dell. Other major shareholders standing in opposition to the deal are Icahn, Southeastern Asset Management, T. Rowe Price, Pzenza Investment Management and Yachtman Asset Management. In total, more than 20% of Dell's shareholders are openly voting against Michael Dell's buyout. The math increasingly is look tough for Michael Dell, given that he needs 42% of the shares outstanding to support his deal-the 16% of shares owned by Michael Dell and other insiders are not being counted and the shares of non-voting shareholders will be counted as no-votes.

Icahn has long maintained that Michael Dell is trying to buy the company on the cheap and that the PC maker is on the verge of a turnaround as it beings to offer new services to business clients. Instead, Icahn has proposed Dell launch a tender offer for 1.1 billion shares at $14 each and recently added a new warrant component that would give investors the chance to own more of the company and profit from any turnaround. Icahn chief teammate in opposing Michael Dell's deal, Southeastern Asset Management, recently pointed to the successful turnaround at Hewlett-Packard as a model for Dell.

The special committee of Dell's board does not like Icahn's counter-proposal to Michael Dell's deal, saying Icahn's idea required too much debt and uncertainty and that shareholders should just take the $13.65 a share Michael Dell and Silver Lake are offering.