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Boston College Law School

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Friday, August 9, 2013

Three thoughts on Dell/Icahn Litigation

The Deal Professor has a nice run down of the issues in Monday's motion to expedite hearing in Delaware.  I just had some thoughts about three possible outcomes on Monday -- now I'm not necessarily predicting any of these outcomes, I am usually pretty bad at that, but because there are a range of possible outcomes and each of them tells us something about how the court is thinking about the substantive issues in the case.  I think the range looks something like this:

Worst Case Scenario for Dell Board/Total Icahn Victory:  The court hears the arguments and says,"Mr. Icahn, you are totally correct.  It has been more than 13 months since the last annual shareholder meeting.  Under Section 211(c) upon application by a shareholder - that's you, Mr. Icahn - I can and hereby do order a meeting.  Oh, and let's have that meeting right now. Who's present? What business do you want the corporation to entertain?"

OK, so that's an extremely low likelihood outcome, the court saves the summary proceeding for the worst of the worst boards.  It would be really bad for Dell, but I don't think this is going to happen.  the Dell board just isn't bad enough to merit a summary proceeding.  Best to ensure against this by making sure Michael Dell and the Silver Lake boys are hanging around the DuPont in Wilmington on Monday.  And, better make sure some associate packs a pile of proxies, just in case.

More Pain for Dell/Almost Victory for Icahn:  The court hears the arguments and says,"OK, so it's been 13 months since your last meeting, so I am going to order a meeting and that such meeting been held coincident with the special meeting of the shareholders.  Yes, yes, counsel, I know I am not required to hold the meetings on the same day and that it might be inconvenient for you.  But, I relied on the fact that you had built in procedural protections into the merger agreement the last time you were here.  I know, counsel, I know, you weren't required under Delaware law to have majority of unaffiliated shareholders vote in favor, I know all of that.  But, I am can order the meeting anytime I want, and I want to order it on the same day as the special  meeting.  If the shareholders with all their knowledge decide that Mr. Icahn is correct, well, they will vote for him.  If not, then not. Good day counsel."

If this is outcome, well then it's pretty clear that the whole changing of the voting rules didn't go over well with Strine who might have felt had because he leaned on all the procedural protections the last time Icahn was in front of him looking for a motion to expedite.

Total Victory Dell/Icahn Loss:  The court hears arguments and says,"Why, Mr. Icahn, in all my years of judging, I have never heard a more lucid and compelling argument.  You are absolutely correct.  I can't help but agree.  I am hereby ordering that an annual meeting of the shareholders be held on a date not later than three days after the previously scheduled special shareholder meeting. Is that convenient for you, counsel for Dell?"

"Uh..yes your honor. Very convenient."

"Then, so ordered."

Scheduling the shareholder meeting after the special meeting would bascially be the end of the road for Icahn.  Delaware does this kind of thing a lot - hand out Pyhrric victories. If it does so in this case, then it's pretty clear that Strine wasn't all that concerned with the voting changes and the adjournments.  It was business judgment all the way, so absent compelling facts or a bona fide comepting bid, let's just get this thing going.

So...we'll see on Monday.   

-bjmq

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