Dell’s Buyout Fate Still Hinges Mostly on Icahn

Just two days out from Dell’s new deadline for counting votes on its founder’s proposed buyout, the company’s fate appears to rest firmly in the hands of the deal’s most vociferous critics: the activist investor Carl C. Icahn and his ally, Southeastern Asset Management, as well as the mutual-fund manager T. Rowe Price, which has opposed the deal.

Chances are slim that the buyout can succeed without yes votes from those three investors, which together hold about 16 percent of the company’s shares, according to an analysis for DealBook by Rotary Gallop, which uses statistical methods to model shareholder voting outcomes.

“If and when the deal passes a shareholder vote it will be because one or all of them voted for it,” said Radhika Dirks, Rotary Gallop’s managing partner.

Together, those three investors cast the swing vote in 83 percent of possible voting situations, Rotary Gallop said. But the buyout’s chance of succeeding is even lower than that number implies — just 8.6 percent, thanks to a small number of theoretically possible situations under which the buyout fails regardless of the trio’s vote.

Of course, shifting alliances can improve Dell’s odds — a little. Persuading just T. Rowe Price to switch sides, with its 4 percent of Dell shares, would help matters, though the votes of Mr. Icahn and Southeastern remain pivotal, according to the analysis.

Mr. Icahn and his allies have so much power in part because the buyout can succeed only if it garners a majority of votes from shares other than those held by the company’s founder, Michael S. Dell and his allies, under a so-called majority of the minority requirement.

That gives the three investors considerable power despite owning just more than 16 percent of Dell’s shares, more than triple the holdings of the next largest single investor, other than insiders, Rotary Gallops says. (Mr. Dell owned about 14 percent of the company’s shares at the end of 2012.)

In order to approve the buyout without the support of Mr. Icahn, Southeastern and T. Rowe Price, nearly every other share would have to be cast for the deal, Rotary Gallop concluded.

By contrast, if T. Rowe Price votes for the buyout proposal, the deal’s success becomes more possible, though Mr. Icahn and Southeastern remain pivotal. T. Rowe’s support would increase Dell’s chance of winning the buyout vote from just less than 9 percent to 28.5 percent, said Rotary Gallop’s co-founder, Travis Dirks.

Mr. Icahn and company may be able to scuttle the buyout, but that doesn’t translate into the power to force Dell’s board to accept an alternate proposal, likea recent one to buy back 1.1 billion shares at $14 each, while offering shareholders warrants to buy shares at $20 apiece.

That is largely because Mr. Dell and other insiders could vote against on any alternative from Mr. Icahn and Southeastern. Dell insiders have considerable control over the fate of the company — more so than about 90 percent of the rest of the Standard & Poor’s 500, according to Rotary Gallop.

Dell declined to comment.