Dell Committee Asks Icahn for More Information on Plan
By Lisa Rapaport & Aaron Ricadela - May 13, 2013 6:10 PM ET
Dell Inc. (DELL)’s special committee asked billionaire
Carl Icahn for more information about his proposed takeover of the
personal-computer maker, made last week as a challenge to founder Michael
Dell’s $24.4 billion buyout.
a letter to Icahn today, the committee said it wants more details about
the financing for his transaction and asked him to identify the persons he
would expect to form the senior management team. It also requested a draft
of a “definitive agreement” for the transaction.
Icahn’s proposal, which would allow Dell to remain a publicly traded
company, includes $12 share that investors would be paid in cash or
additional Dell stock, according to filings. Photographer: Scott
May 10 (Bloomberg) --
Billionaire investor Carl Icahn talks about his alternative offer
for Dell Inc. that could enable investors to keep their stakes in
the company. Icahn is seeking to upend a $24.4 billion buyout of
Dell by its founder, Michael Dell, and Silver Lake Management LLC.
He speaks with Trish Regan on Bloomberg Television's "Bloomberg
West." (Source: Bloomberg)
Icahn and his partner Southeastern Asset Management Inc. plan to borrow
money for Dell to offer $12 a share in cash or stock to investors, while
also letting them retain stakes in a public company. The payout would
dilute existing Dell shares, which Icahn said would have a value of at
least $1.65 apiece. In contrast to
Michael Dell’s plan to take the company private, Icahn is asking
investors to bet on the future of a PC maker beset by rising competition,
tumbling demand and mounting debt.
“The most likely scenario at this point is that Michael Dell’s deal goes
through,” Lance Vitanza, an analyst at CRT Capital Group LLC, said in an
interview today. “There are a lot of people who don’t want the
Icahn is also seeking a seat on Dell board and proposed five other
potential board members, according to a filing today.
Dell’s shares rose less than 1 percent to $13.52 at the close in
New York, about 1 percent below the $13.65-a-share price CEO Dell and
Silver Lake Management LLC are offering to take the company private.
“It is not clear to us whether you intend to formulate your transaction as
an actual acquisition proposal that the Board could evaluate and
potentially endorse or accept or rather to propose it as an alternative
that the Board could consider in the event the pending sale to Silver Lake
and Michael Dell is not approved,” the special committee said in today’s
addition to working capital, Dell is likely to have “other significant cash
needs,” such as approximately $1.7 billion of debt maturities within about
12 months after closing, according to the letter.
Lee Harper, a spokeswoman for Southeastern, and Icahn didn’t immediately
return calls seeking comment. Gordon Goldstein, a spokesman for Silver
Lake, declined to comment on Dell’s letter to the two investors today.
Icahn, who along with Southeastern owns almost 13 percent of the shares,
said last week that if he prevails, he would look to replace founder and
CEO Michael Dell. Financing for their proposal will come from existing
cash at the PC maker and about $5.2 billion in new debt.
Icahn today proposed himself and five other potential board members,
including Harry Debes, former CEO of business-software maker Infor, and
Rajendra Singh, CEO of investment firm Telecom Ventures LLC, as part of
the effort to scuttle the original agreement.
Icahn also said he would nominate Icahn Enterprises President and CEO
Daniel Ninivaggi, and Icahn Enterprises Managing Director Jonathan
Christodoro. Southeastern nominated its CEO, Bernard Lanigan, Jr., and
five other people, including New York City Chief Information Officer Rahul
Merchant. Merchant is an appointee of New York City Mayor
Michael R. Bloomberg, who is the founder and majority owner of
Bloomberg LP, the parent of
prevail, Icahn will have to persuade those investors who want to keep an
equity stake in Dell that fresh leadership can do a better job playing
catch-up in cloud computing while managing greater debt and combating the
biggest sales decline in the history of personal computing.
Investors who don’t want Dell stock face bigger risks under Icahn’s plan.
While they would receive $12 a share, there’s no guarantee that they’ll be
able to find a buyer willing to pay $1.65 or more for their existing
holdings -- a prospect that may make the Silver Lake-Dell bid more
Icahn and Southeastern said last week their proposal gives investors a
chance to benefit from potential future growth.
“Mathematically, there is no question it is superior,” Icahn said in an
interview on Bloomberg Television last week. “You have a choice of getting
$12 and still owning Dell, which has great potential.”
Even so, Jefferies Group LLC, the investment bank that Icahn said may
commit $1.6 billion to help finance his takeover, told clients in a
research report that Dell’s investors are more likely to favor a competing
“Most shareholders would prefer the certainty of $13.65 in cash” from
Michael Dell and Silver Lake,
Peter Misek, an analyst at New York-based Jefferies, wrote in a note
today. Investors may accept that rather “than risk the uncertainty and the
ensuing stock volatility if the Silver Lake proposal were voted down and
Icahn/Southeastern attempt to install a new board of directors.”
Richard Khaleel, a spokesman for New York-based Jefferies, declined to
comment on whether the firm has committed funding or on the analyst note.
Owning Dell hasn’t been such an attractive option for shareholders in
recent years. The shares were trading above $30 in 2007 after Michael Dell
returned as CEO following a hiatus, yet they have been sinking amid
plummeting demand for PCs and accelerating competition for selling the
data-center products and services Dell has opened its coffers to acquire.
Dell’s board is predicting another year of lackluster growth as demand for
PC ebbs, underscoring the urgency behind the company’s decision to be
taken private, documents filed in March showed.
Sales for the year ending next January will slip to $56.5 billion, and
Dell’s PC business will shrink by $10 billion over four years, according
to projections in a proxy statement filed with regulators.
think Icahn is gesticulating in order to push Dell/Silver Lake to bump so
that he can get out break-even or with a small profit,” said Albert
Saporta, managing director at at AIM&R, an investment research firm based
in Geneva. “It should be pretty clear by now that Dell is not worth a lot
more than $13.65.”
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