For Icahn, a Game of Chicken With Dell's Board Let's face it, our lives would be much less interesting without Carl C. Icahn, whom I have previously referred to as a genius version of Wile E. Coyote. Take Mr. Icahn's latest endeavor, Dell. In opposing the $24.4 billion buyout of the struggling computer maker, it shows he is a master of bobbing and weaving. Mr. Icahn has reportedly acquired 6 percent of Dell and is now proposing two alternatives to the buyout. The first is that if the proposed acquisition is voted down, the computer maker's board should immediately declare a dividend of $9 a share, taking on an additional $5.25 billion of debt to pay for it. According to Mr. Icahn, Dell stock is worth roughly $13.81 a share, so shareholders would have a total value of $22.81 a share. If the board does not implement his proposed dividend recapitalization, Mr. Icahn then indicated that Dell should commit to hold its annual meeting at the same time shareholders vote on the deal. Mr. Icahn then generously promised to run his own slate of directors to replace the current board. If his slate proved victorious, Mr. Icahn's handpicked directors could then implement his first proposal. In that instance, Mr. Icahn also promised to provide this $5.25 billion loan from his own personal wealth and that of his own fund. Mr. Icahn has added a hammer to his proposal, making it very clear that he would start a proxy fight to defeat the Dell acquisition if his proposals are rejected. Dell's response was quite restrained. The company did not spurn the proposal, but instead stated: [t]he Special Committee is currently conducting a robust "go-shop" process to determine if there are third parties interested in proposing alternative transactions that could be superior for Dell's public shareholders to the going-private transaction - and we welcome Carl Icahn and all other interested parties to participate in that process. ... Our goal is to secure the best result for Dell's public shareholders - whether that is the announced transaction or an alternative. So, what is going on here? First, Mr. Icahn is in a good position to fight the current Dell buyout. In order to protect shareholders, Dell and its buyers agreed that the acquisition must be approved by a majority of independent investors, meaning the founder, Michael S. Dell, cannot vote. Under this assumption, if more than roughly 42.5 percent of shareholders vote no, the deal will not happen. Southeastern Asset Management and T. Rowe Price hold about 14 percent of the company and, with Mr. Icahn's stake, about 20 percent. This means the parties only need the support of investors representing about 22.5 percent of the shares to defeat this deal. Still, the Dell board is unlikely to give Mr. Icahn the promise he wants for two reasons. First, the board said it had already explored a dividend recapitalization and passed on that alternative. Second, even if the Dell board thought Mr. Icahn's proposal was fantastic, the current agreement requires the board to support the Dell acquisition. In fact, under the agreement the board cannot change its recommendation unless it deems Mr. Icahn's proposal to be something that contains information the board did not know before the transaction and that a failure to act on it would be a breach of the board's fiduciary duties. This is not going to be the case here since the board already considered the alternative. While there may be wiggle room to sidestep these requirements, it is hard to see the Dell board doing anything other than using the agreement to justify opposition to Mr. Icahn. Dell is even restrained in how it can publicly respond to Mr. Icahn. Except if required by law, Dell's agreement prohibits it from making any public comment on Mr. Icahn's proposal without the approval of the buyout parties. This leaves the issue of the shareholder meeting. Mr. Icahn is attempting to use Delaware law to squeeze Dell. Under the state's law, Dell's annual meeting has to be held within 13 months of the last one. Dell's last meeting was July 13, 2012, so the next one would need to be held by Aug. 13, give or take a day. Dell could try to litigate the issue to gain more time, but that might only buy an additional month or two before it could be forced to hold a meeting. Mr. Icahn is thus right that the meetings could be held at the same time, but scheduling them is the sole prerogative of the board. Dell thus has a lot of latitude to keep the meetings separate. And the board is likely to use this flexibility. After all, why would the board want to fight for its life simultaneously while fighting for an acquisition proposal. This would tie the members" careers to the acquisition proposal when the members would want to be evaluated separately. So where does that leave us? Well, the Dell announcement I referred to above can be seen as a way to buy time. The board and its advisers are no doubt strategizing about whether the current deal can be salvaged and, if so, how. Once again, it is clear that Mr. Icahn is good at his job. He knows the board will probably ignore his requests. But by putting the threat of a proxy contest and "years of litigation" on the table, he is trying to turn up the heat on the board. It is hard to know how well this will work. Everyone knew going into this transaction that the buyout could prompt years of litigation. Mr. Icahn himself is being sued over his deal to buy XO Communications in New York. And remember, Dell was very careful here to consider the alternatives and put in "best practices" in terms of considering this deal. There may be "years of litigation," but that does not mean the price here isn't fair or that shareholders won't lose. (Also, Mr. Icahn could dissent and seek appraisal for his shares in Delaware, but that is really the problem of the buyers who would have to pay Mr. Icahn, not the Dell board. There is no condition in the agreement allowing the buyers to back out if too many shareholders dissent.) But still, what Mr. Icahn is saying is that Dell could lose the vote on the acquisition, and then "I am coming after you to throw you out" - an embarrassing event at best. In the end, Mr. Icahn probably does not want to run the company, and Mr. Dell does not want that either. Ultimately, Mr. Icahn - with his announcement - is just pressuring the board to sweeten the deal for shareholders. This is all about bobbing and weaving, and that is what Mr. Icahn is doing with his proposals. Blocking the deal and adopting Mr. Icahn's proposal would leave a financially strained and struggling computer manufacturer in a world where people want smartphones and tablets. This is how Dell is different than a simple choice between a management-led buyout and staying public and taking on more debt. Dell needs to drastically restructure and alter its business, something that arguably would be much harder as a public company. It means that while the Dell board faces pressure to find a better deal, there may not be one. And so it comes down to this. Can Dell - without its current management or perhaps board - turn around as a public company? For me, I keep thinking that shareholders block an acquisition less than 1 percent of the time. But one of the few successful "no vote" campaigns was in 2007, involving the Lear Corporation's $2.9 billion proposed buyout by none other than Mr. Icahn. It was a bad choice, and Lear eventually went bankrupt. In Dell's case, the question now is who, if anyone, blinks first in this game of chicken?