The Special Committee of the Board of Directors of Dell Inc.
(NASDAQ: DELL) today issued the following statement in response to
a letter it received from Carl Icahn urging that Dell pursue a
leveraged recapitalization and pay a $9.00 per share dividend if
the agreed going-private transaction at $13.65 per share, which was
announced on February 5, 2013, is voted down by shareholders. The
text of the letter is attached.
“The 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. Evercore Partners, an
independent financial advisor to the Special Committee, is actively
soliciting third parties to determine their potential interest and
is incentivized to find a superior proposal if one exists. The
process will run through March 22, 2013, after which negotiations
will continue if a potentially superior proposal emerges. Our goal
is to secure the best result for Dell’s public shareholders --
whether that is the announced transaction or an alternative.”
The Special Committee, consisting of four independent Dell
directors, is being advised by independent financial advisors, JP
Morgan and Evercore Partners, and an independent legal advisor,
Debevoise & Plimpton LLP.
Icahn Enterprises L.P. March 5, 2013
Board of Directors Dell Inc. One Dell Way Round Rock, Texas 78682
Attn.: Laurence P. Tu Senior Vice President, General Counsel and
Secretary
Re: Agreement and Plan of Merger, dated
as of February 5, 2013
(the "Going Private
Transaction").
Dear Board Members:
We are substantial holders of Dell Inc. shares. Having
reviewed the Going Private Transaction, we believe that it is not
in the best interests of Dell shareholders and substantially
undervalues the company. Rather than engage in the Going
Private Transaction, we propose that Dell announce that in the
event that the Going Private Transaction is voted down by
shareholders, Dell will immediately declare and pay a special
dividend of $9 per share comprised of proceeds from the following
sources: (1) $4.26 per share, or $7.4 Billion, from available cash
as proposed in the Going Private Transaction, (2) $1.73 per share,
or $3 Billion, from factoring existing commercial and consumer
receivables as proposed in the Going Private Transaction, and (3)
$4.26, or $5.25 Billion in new debt.
We believe that such a transaction is
superior to the Going Private
Transaction because we value the proforma "stub" at $13.81 per
share using a discounted cash flow valuation methodology based on a
consensus of analyst forecasts. The "stub" value of $13.81 combined
with our proposed $9.00 special dividend gives Dell shareholders a
total value of $22.81 per share, representing a 67% premium to the
$13.65 per share price proposed in the Going Private Transaction.
We have spent a great deal of time and effort in determining the
$22.81 per share value and would be pleased to meet with you to
share our analysis and to understand why you disagree, if you
do.
We hope that this Board will agree to adopt our proposal by
publicly announcing that the Board is committed to implement our
proposal if the Going Private Transaction is voted down by Dell
shareholders. This would avoid a proxy fight.
However, if this Board will not promise to
implement our proposal in the event that the Dell shareholders vote
down the Going Private Transaction, then we request that the Board
announce that it will combine the vote on the Going Private
Transaction with an annual meeting to elect a new board of
directors. We then intend to run a slate of directors that, if
elected, will implement our proposal for a leveraged
recapitalization and $9 per share dividend at Dell, as set forth
above. In that way shareholders will have a real choice between the
Going Private Transaction and our proposal. To assure shareholders of the availability of sufficient
funds for the prompt payment of the dividend, if our slate of
directors is elected, Icahn Enterprises would provide a $2 billion
bridge loan and I would personally provide a $3.25 billion bridge
loan to Dell, each on commercially reasonable terms, if that bridge
financing is necessary.
Like the “go shop" period provided in the Going Private
Transaction, your fiduciary duties as directors require you to call
the annual meeting as contemplated above in order to provide
shareholders with a true alternative to the Going Private
Transaction. As you know, last year's annual meeting was held on
July 13, 2012 (and indeed for the past 20 years Dell's annual
meetings have been held in this time frame) and so it would be
appropriate to hold the 2013 annual meeting together with the
meeting for the Going Private Transaction, which you have disclosed
will be held in June or early July. If you fail to agree
promptly to combine the vote on the Going Private Transaction with
the vote on the annual meeting, we anticipate years of litigation
will follow challenging the transaction and the actions of those
directors that participated in it. The Going Private Transaction is
a related party transaction with the largest shareholder of the
company and advantaging existing management as well, and as such it
will be subject to intense judicial review and potential challenges
by shareholders and strike suitors. But you have the opportunity to
avoid this situation by following the fair and reasonable path set
forth in this letter.
Our proposal provides Dell shareholders
with substantial cash of $9 per share and the ability to continue
as owners of Dell, a stock that we expect to be worth approximately
$13.81 per share following the dividend. We believe, as apparently
docs Michael Dell and his partner Silver Lake, that the future of
Dell is bright. We see no reason that the future value of Dell
should not accrue to ALL the existing
Dell shareholders - not just Michael Dell.
As mentioned in today's phone call, we
look forward to hearing from you tomorrow to discuss this matter
without the need for us to bring this to the public arena.
Very truly
yours,
Icahn Enterprises
L.P.
By:
Carl C.
Icahn
Chairman of the
Board
Forward-looking Statements
Any statements in these materials about prospective performance
and plans for the Company, the expected timing of the completion of
the proposed merger and the ability to complete the proposed
merger, and other statements containing the words “estimates,”
“believes,” “anticipates,” “plans,” “expects,” “will,” and similar
expressions, other than historical facts, constitute
forward-looking statements within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Factors or risks that could cause our actual results to differ
materially from the results we anticipate include, but are not
limited to: (1) the occurrence of any event, change or other
circumstances that could give rise to the termination of the merger
agreement; (2) the inability to complete the proposed merger
due to the failure to obtain stockholder approval for the proposed
merger or the failure to satisfy other conditions to completion of
the proposed merger, including that a governmental entity may
prohibit, delay or refuse to grant approval for the consummation of
the transaction; (3) the failure to obtain the necessary
financing arrangements set forth in the debt and equity commitment
letters delivered pursuant to the merger agreement; (4) risks
related to disruption of management’s attention from the Company’s
ongoing business operations due to the transaction; and
(5) the effect of the announcement of the proposed merger on
the Company’s relationships with its customers, operating results
and business generally.
Actual results may differ materially from those indicated by
such forward-looking statements. In addition, the forward-looking
statements included in the materials represent our views as of the
date hereof. We anticipate that subsequent events and developments
will cause our views to change. However, while we may elect to
update these forward-looking statements at some point in the
future, we specifically disclaim any obligation to do so. These
forward-looking statements should not be relied upon as
representing our views as of any date subsequent to the date
hereof. Additional factors that may cause results to differ
materially from those described in the forward-looking statements
are set forth in the Company’s Annual Report on Form 10–K for the
fiscal year ended February 3, 2012, which was filed with the SEC on
March 13, 2012, under the heading “Item 1A—Risk Factors,” and in
subsequent reports on Forms 10–Q and 8–K filed with the SEC by the
Company.
Additional Information and Where to Find It
In connection with the proposed merger transaction, the Company
will file with the SEC and furnish to the Company’s stockholders a
proxy statement and other relevant documents. These materials do
not constitute a solicitation of any vote or approval. Stockholders
are urged to read the proxy statement when it becomes available and
any other documents to be filed with the SEC in connection with the
proposed merger or incorporated by reference in the proxy statement
because they will contain important information about the proposed
merger.
Investors will be able to obtain a free copy of documents filed
with the SEC at the SEC’s website at http://www.sec.gov. In
addition, investors may obtain a free copy of the Company’s filings
with the SEC from the Company’s website at
http://content.dell.com/us/en/corp/investor-financial-reporting.aspx
or by directing a request to: Dell Inc. One Dell Way, Round Rock,
Texas 78682, Attn: Investor Relations, (512) 728-7800,
investor_relations@dell.com.
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