Icahn With Southeastern Challenges Silver Lake’s Offer for Dell
By Mohammed Hadi and Trish Regan - May 10, 2013
Billionaire Carl Icahn, seeking to upend a $24.4 billion buyout of Dell Inc. by its founder and Silver Lake Management LLC, proposed an alternative that could have investors keep their stakes in the computer maker and get $12 a share in cash.
Under Icahn’s plan, shareholders will be able to choose between a $12 a share cash distribution or $12 in additional shares valued at $1.65 apiece, according to a letter to Dell’s board obtained by Bloomberg News. Icahn and Southeastern Asset Management Inc., which together own 13 percent of Dell, are offering an alternative to the $13.65-a-share bid by Michael Dell and Silver Lake.
Southeastern and Icahn, in the sharply worded letter, said their proposal gives investors a chance to benefit from potential future growth at Dell and that it is more valuable than the buyout proposal. The two investors plan to take additional stock in the third-largest computer maker, rather than cash, they said.
“It is insulting to shareholders’ intelligence for the board to tell them that this board only has the best interests of shareholders at heart, and then accept Michael Dell’s offer to purchase the company he founded for $13.65 per share, a price far below what we consider its value to be,” according to the letter, which is dated May 9 and signed by Icahn and Southeastern’s president G. Staley Cates.
Dell, which has risen 31 percent this year, closed at $13.32 a share in New York trading yesterday. The company has lost $125 billion in market value since its peak in March 2000.
Dell Debt
Financing for Icahn’s proposal will come from existing cash at Dell and about $5.2 billion in new debt. That compares with about $16 billion of debt under the buyout proposal, according to Icahn’s letter.
“Either give shareholders the real choice they are entitled to or face the legal liability for your failures,” they wrote to the board.
David Frink, a spokesman for Round Rock, Texas-based Dell, didn’t immediately respond to a request for comment outside regular business hours. Representatives of Silver Lake and a special committee of Dell’s board, which fielded buyout proposals, also didn’t immediately respond to requests.
Michael Dell and private-equity firm Silver Lake will have to determine whether to sweeten their offer, which was outlined in February, while Dell’s board considers whether the new proposal from Icahn might be deemed superior. Blackstone Group LP (BX), the world’s biggest buyout firm, pulled out of bidding for Dell last month amid concerns over a worsening global PC slump.
Blackstone’s Withdrawal
A record decline in first-quarter computer sales helped trigger the withdrawal, Blackstone said in a letter released at the time. Blackstone had previously made a non-binding offer to acquire Dell (DELL) in March.
Icahn and Southeastern will work to “persuade all shareholders to reject the Dell offer” and will put up a slate of 12 directors to challenge the current board at the annual shareholder meeting if their proposal is not recommended by the board, they said.
Michael Dell, who founded the PC provider in his Texas dorm room in 1984, needs to ensure majority control so he can pursue his plan to retool the struggling company as a maker of data-center gear and software for corporations -- without the scrutiny of public investors.
To contact the reporters on this story: Mohammed Hadi in Hong Kong at mhadi1@bloomberg.net; Trish Regan in New York at tregan8@bloomberg.net
To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net; Tom Giles at tgiles5@bloomberg.net
