Icahn steps up the pressure on Dell, but investors aren’t buying it

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Activist investor Carl Icahn strikes again in the saga over PC maker Dell. He and Southeastern Asset Management have added a warrant, which could be exchanged for stock, to their $14-per-share offer for Dell. The move comes ahead of a July 18 vote on another Dell proposal, a $13.65-per-share, go-private deal from CEO Michael Dell, private equity firm Silver Lake and Microsoft.

The warrant is worth between $15.50 to $18 a share, according to Icahn. But the warrants can only be exchanged for stock if Dell’s share hit $20, a difficult goal given the declining sales of PCs, which fell by 11% in the second quarter. Although Dell shares were up yesterday on the news that Icahn would sweeten his Dell bid, the stock dropped in morning trading today after investors saw the details.

Icahn’s offer was already a bit risky given that the financing for his deal is contingent upon shareholders approving all 12 Dell directors nominated by him and Southeastern. That’s a tall order under the best of circumstances. Still, Icahn needed to step up the pressure on the Michael Dell deal because proxy advisory firms, which make recommendations to investors on shareholder proposals, supported the buyout.

The vote on the deal is expected to be close, especially because Michael Dell, the company’s largest shareholder, can’t participate due to his conflict of interest. Icahn and Southeastern Asset Management are two of Dell’s largest outside shareholders.

Despite some ongoing opposition to the deal, Michael Dell has a decent shot of winning. Many investors would want to avoid a further fall in Dell’s stock, which would likely happen if the Michael Dell deal is voted down. So after five months of intense fighting over Dell, investors might just end up where they started: with the original $13.65 Michael Dell offer.