Dell Inc. (DELL) made public a Tuesday letter by activist
investor Carl Icahn that proposes a huge special dividend if a
planned $24.4 billion leveraged buyout by founder Michael Dell
fails, and threatens the company with "years of litigation" if it
doesn't combine a vote on the deal with its annual meeting.
Dell responded by, yet again, underscoring that it is conducting
a "robust" "go-shop" process and that its adviser Evercore is
actively soliciting potential alternative proposals as part of a
go-shop period that ends March 22. It added that it welcomes Mr.
Icahn's help in finding an alternative proposal.
The special committee's response comes after CNBC on Wednesday
reported that Mr. Icahn had amassed a 6% stake in Dell--making him
the PC-maker's second largest outside shareholder--and is agitating
for a leveraged recapitalization.
Mr. Icahn's letter asks the company to pay a per-share dividend
of $9 if the deal is voted down by shareholders. He said by his
calculations, that transaction would be superior to the current
going-private offer, citing a "stub" value of $13.81 a share which,
combined with the special dividend, represents a 67% premium to the
current $13.65 per-share offer price.
"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,"
said Mr. Icahn in his letter.
Mr. Icahn added that if the board doesn't promise to implement
the dividend if the deal fails, they should combine the annual
general meeting--slated to be held in June or early July--with the
vote on the going-private deal.
He said he will nominate a slate of directors that, if elected,
will implement the leveraged recapitalization and dividend
proposal, giving shareholders a choice between the deal to go
private and Mr. Icahn's proposal. "In that way shareholders will
have a real choice between the Going Private Transaction and our
proposal," he said.
He added that the dividend could be funded by $4.26 a share from
available cash as proposed in the going-private deal, $1.73 a share
from factoring existing commercial and consumer receivables and
$4.26 in new debt. Mr. Icahn also said that if his directors are
elected Icahn Enterprises would provide a $2 billion bridge loan
and he would personally provide a $3.25 billion bridge loan to Dell
if needed.
Dell's latest statement comes just a day after it released a
statement saying it unanimously determined after a process of more
than five months that a sale would be the best alternative for
stockholders and added it "negotiated aggressively" to ensure the
best possible value.
Mr. Icahn's stance teams him up with Dell's largest independent
shareholder, Southeastern Asset Management, which also has
suggested a leveraged recapitalization as a solution.
Earlier this week, Southeastern accused the company of
withholding information from investors in an effort to take the
company private, a proposal the shareholder continues to oppose. On
Wednesday, The Wall Street Journal reported that Southeastern has
considered whether to team up with another player to attempt a
counterbid to the proposed deal. The paper also said that the asset
management firm has also discussed rolling Dell shares into the
deal alongside the 15% stake committed by Mr. Dell.
Shares of Dell closed Wednesday at $14.32 and were inactive
premarket. The stock has dropped 16% in the past 12 months.
Write to Saabira Chaudhuri at saabira.chaudhuri@dowjones.com
03-07-13 0646ET
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