Carl Icahn sues Dell over 'unprivatisation' plan

Carl Icahn versus Dell, round two

Activist investor Carl Icahn is taking on Dell Technologies, once again.

This time, he is claiming in a freshly filed lawsuit that the company's plan to return the company to the stock market is designed to enrich insiders at the expense of shareholders in DVMT, the tracking stock set-up to reflect the value of VMware.

DVMT was set up to help finance Dell's acquisition of EMC, claims Icahn, because Dell came up $10 billion short when it was trying to finance that 2015 acquisition.

Now, Dell Technologies is planning a return to the stock market without the hassle of a full initial public offering (IPO) by buying back the shares in DVMT that it doesn't own.

But Icahn claims that DVMT is ‘massively undervalued' because the stock doesn't confer any voting rights and investors don't trust Michael Dell or Silver Lake Partners, the private equity that helped fund the 2013 privatisation of Dell Technologies.

Icahn adds that Dell Technologies is trying to bully investors into accepting what he regards as a low-ball offer.

In a letter in mid-October, Icahn claimed that Icahn Enterprises had built-up an 8.3 per cent stake in DVMT because it was one of the most undervalued companies it had ever seen. Icahn urged other investors to vote against Dell's proposed deal in order to drive a deal that better reflects what he thinks is the real value of Dell Technologies.

Icahn claims that Dell Technologies' current proposals will deliver an $11 billion windfall to Dell Technologies and its shareholders - Michael Dell and Silver Lake - at the expense of DVMT stockholders.

Launching the legal action, Icahn claimed that:

Dell Technologies has failed to provide basic financial information relating to the deal;

The deal is a "conflicted transaction that benefits the controlling stockholders at the expense of DVMT stockholders";

The boards of Dell Technologies and DVMT have a legal duty to fairly reflect all shareholders' interests, but that the company must release all information for independent stockholders to ascertain that is the case;

"For the past two years, DVMT shares traded at a massive discount. But, instead of fulfilling their fiduciary duties to DVMT stockholders and trying to close that massive discount, the Dell Board chose to engage in a complex share repurchase program designed to capture further value," the letter continues.

It concludes: "The proposed Class V merger is a controlling stockholder transaction, and as such, Delaware law requires that minority stockholders be protected. To assess whether minority stockholders have been adequately protected, it is imperative that we are permitted to review the company's relevant books and records. What is Dell hiding?"

Icahn opposed Dell founder and CEO Michael Dell's original plan to take the company private back in 2013. Icahn fought a long battle against Dell, claiming that the buyout by Michael Dell and private equity firm Silver Lake Capital Partners undervalued the company.