A couple of weeks ago, up-for-sale PC purveyor Dell (UNKNOWN:DELL.DL) offered Carl Icahn and Icahn Enterprises (NASDAQ:IEP) $25 million to play nice in its bid for the company. The move was an olive branch from Dell's board, wisely trying to avoid a proxy battle involving the company's already frustrated shareholders and other potential suitors, including founder Michael Dell. Though he didn't take the bribe, Icahn and Dell reached an agreement -- a sort of Rules of Engagement for the buyout procedure. The deal should protect investors, while still enabling the board to shop the company to the best bidder. Here's what you need to know.

Say uncle
Carl Icahn is well known for pushing corporate board buttons to get what he wants -- it's kind of how he built his empire. The investor builds formidable stakes in his target companies to influence other shareholders and, ultimately, the company decision makers.

While many companies pride themselves on not catering to activist demands, and subsequently subjecting shareholders to costly litigation, Dell seems adamant on keeping things peaceful. It started two weeks ago, when it offered its suitors a form of reimbursement for due diligence in exchange for a good, clean fight. Icahn had little interest in the measly $25 million, but he was willing to come to some terms with the board.

Under the recent agreement, Icahn Enterprises agrees to keep its stake under 10% of the outstanding shares (the investor already has a $1 billion position), and will not partner with other shareholders to represent more than 15% of the company. This keeps Icahn firmly in minority stakeholder territory and prevents a hostile takeover -- sort of. While his stake cannot grow much beyond its position today, Icahn can still wage a proxy battle if he determines Dell's board is acting against the best interest of shareholders. Keeping this right was the ultimate reason the investor refused Dell's bribe, which the other suitors, Blackstone (NYSE:BX)  and Silver Lake Partners, agreed to. As of last Friday, Blackstone had backed out of the deal after being disappointed with the company's revenue outlook.

In good company
While Icahn is often looked at as a bully, he's far from alone in his view that Silver Lake Partners' (in cahoots with Michael Dell) bid was inferior and undervalues the company.

Another activist investor, Southeastern Asset Management, owns 8.4% of Dell and has publicly stated that the outstanding offer is no good and cheats shareholders. Blackstone had made a higher bid for the company, as well as Icahn. Both offers involve keeping a portion of Dell as a public entity.

For the investors
Dell shareholders should feel some degree of comfort that these power investors are taking a strong stance -- even if it's more in their interest than they are willing to admit. By most measures, Michael Dell/Silver Lake's bid really isn't a great deal for shareholders. The board was initially in Michael Dell's corner, but it looks like the playing field is more even at this point.

Who do you think offers the best deal to Dell shareholders? Sound off below.



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