The Special Committee of the Board of Dell Inc. (NASDAQ: DELL)
today issued the following letter to stockholders:
Dear Stockholders:
We are writing to update you regarding our evaluation of the
various leveraged recapitalization transactions that Carl Icahn has
proposed, including the most recent version put forth at the end of
last week, and to make some observations about leveraged
recapitalizations more broadly.
The basic concept that Mr. Icahn has proposed would be a $15.6
billion self-tender by the Company at a price for each share
actually purchased of $14. Mr. Icahn and Southeastern Asset
Management would agree not to tender any of their shares. On
Friday, Mr. Icahn proposed that the tender price would also
include, for each four shares purchased, one warrant to purchase an
additional share at a $20 strike price. If these transactions were
consummated and all stockholders other than Mr. Icahn and
Southeastern tendered, each stockholder would be required to retain
approximately 29% of his or her shares in the highly leveraged
public company that would result, and would receive for each share
held approximately $9.99 in cash and 0.18 warrants.
We have reviewed with our financial and legal advisors the risks
and rewards of Mr. Icahn’s proposal, as well as the financing he
has outlined for that proposal.
At various points, Mr. Icahn has asked the Special Committee to
declare the transaction he has outlined a “Superior Proposal” under
Dell’s existing merger agreement or to withdraw our recommendation
in favor of the Michael Dell/Silver Lake merger. In fact, however,
he has not constructed his proposal in a manner that makes that
possible or appropriate. First, the financing he has proposed
cannot be accepted by us – it is expressly conditioned on the
election to the Dell board of all 12 nominees of Icahn and
Southeastern. Second, while he has asked us either to abandon the
Michael Dell/Silver Lake merger agreement or to make a
recommendation change that would permit Mr. Dell and Silver Lake to
terminate that agreement, Mr. Icahn’s proposal specifically
cautions that his transaction might never be completed and offers
no remedies in the event that he or his nominees or financing
sources fail to consummate a transaction. And third, he has
identified neither a management team, nor a strategic plan or
vision, on the basis of which the Committee or anyone else could
evaluate the value of the “stub” equity he contemplates.
More broadly, based on analyses prepared by our advisors and our
own view of the business, we do not believe that Mr. Icahn’s
proposal is superior to the certainty of value offered by a sale of
the entire Company at $13.65 per share. The addition of warrants to
Mr. Icahn’s concept has not meaningfully altered the value
equation: The warrants themselves would, according to the analyses
we have reviewed, be of modest value and that value would be offset
in part by their dilutive effect on the stub equity held by the
recipient. Further, on receipt, the entire value of the warrants
would likely be taxable to the holder. Finally, there is a
fundamental illogic in ascribing meaningful value to the transfer
of a portion of any upside above $20 per share from those who most
believe in it (apparently Mr. Icahn and Southeastern) to those who
do not believe in it (the tendering stockholders who have sought to
cash out at $14 per share).
While for the foregoing reasons Mr. Icahn’s proposal does not
provide the basis for the Committee to change its recommendation,
we are mindful of the fact that the Board could independently
resolve to consummate various leveraged recapitalization
transactions – including one along the lines outlined by Mr. Icahn
– with or without an agreement by certain shareholders like Mr.
Icahn and Southeastern to roll over their shares. Throughout its
thorough, multi-month review process, the Special Committee has
carefully considered the possibility of various recapitalization
transactions. We have reviewed sources of financing for such a
transaction, the credit parameters of the Company following a
substantial dividend or stock repurchase, and the liquidity and
market implications of various potential approaches.
To summarize, while the Company’s strong balance sheet makes it
possible to borrow significant amounts, we consider it unwise to
layer substantial financial risk on a company already facing
significant challenges from competition and from the rapid pace of
technological change. It is, we believe, not an accident that no
large publicly traded technology company carries high levels of
debt. And while we recognize that, as a private company controlled
by Mr. Dell and Silver Lake, the Company will have a significant
debt burden, the risks of that capital structure will be borne
entirely by the buyers and not by the public stockholders.
Moreover, the buyers have the financial resources to invest
additional funds if that proves necessary.
Conversely, a leveraged recapitalization of the sort advocated
by Mr. Icahn would force Dell stockholders to maintain meaningful
equity exposure to a non-investment grade, publicly traded company
that we believe would likely be ill-prepared to weather further
downturns in the PC business and could be hamstrung in its ability
to make the additional investments needed to complete its
transformational plan. We believe such a company would face
instability that would undermine customer confidence and make it
harder to attract and retain the best employees.
We have also evaluated alternative recapitalization transactions
that involve a stronger balance sheet and more modest returns of
capital. These would not pose the same risk to Dell’s future, but,
in our view, they also would not fundamentally create value.
Accordingly, we concluded, and we continue to believe, that a sale
at a premium remains a superior option to a leveraged
recapitalization.
In closing, we wish to note that it is unfortunate Mr. Icahn
continues to conduct his campaign by trying to discredit the
Special Committee and accuse it of frightening Dell stockholders.
Such accusations do a disservice to all of you. The Committee has
studied a complicated situation with great care, balanced risks and
rewards in a dispassionate manner and concluded the transaction you
are being asked to vote for on July 18th is in the best interests
of stockholders. It would be irresponsible if we did not share with
all stockholders the reasons for our conclusions.
In addition, we have taken extraordinary measures to ensure Mr.
Dell’s neutrality and to leave the final decision with the
disinterested stockholders. And for many months now, any party,
including Mr. Icahn and Southeastern, has had and continues to have
the opportunity to purchase the Company at a price higher than
$13.65 a share. No such party has emerged.
We appreciate that different stockholders may have different
views about the alternatives facing the Company or different
appetites for business and financial risk. We encourage an open
debate about these matters. But we urge you to base your decision
on the facts and not be misled by Mr. Icahn’s self-serving
accusations.
The Special Committee has had only one goal from the beginning –
and that is to maximize value for stockholders, however that goal
is best achieved. We have studied the options very carefully and
our conclusion, which has been supported by all of the leading
proxy advisory services, is that a sale transaction at a
substantial and certain premium is the best way forward. That is
why we urge you to vote the WHITE card promptly by telephone or
internet in support of receiving $13.65 per share in cash, and to
be sure your vote is received in time to be counted at Dell’s
Special Meeting to be held on Thursday, July 18, 2013 at 8:00 a.m.
CDT.
Shareholders who have any questions, require assistance in
voting the WHITE proxy card, or need additional copies of Dell’s
proxy materials are encouraged to contact MacKenzie Partners
toll-free at (800) 322-2885, or via email at
Dell@mackenziepartners.com.
Sincerely,
Alex J. MandlJanet F. ClarkLaura
ConigliaroKenneth M. Duberstein
THE SPECIAL COMMITTEE OF THEBOARD OF
DIRECTORS OF DELL INC.
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 1, 2013, which was filed with the SEC on
March 12, 2013, 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
filed with the SEC a definitive proxy statement and other relevant
documents, including a form of proxy card, on May 31, 2013. The
definitive proxy statement and a form of proxy have been mailed to
the Company’s stockholders. Stockholders are urged to read the
proxy statement and any other documents filed with the SEC in
connection with the proposed merger or incorporated by reference in
the proxy statement because they 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.
The Company and its directors, executive officers and certain
other members of management and employees of the Company may be
deemed “participants” in the solicitation of proxies from
stockholders of the Company in favor of the proposed merger.
Information regarding the persons who may, under the rules of the
SEC, be considered participants in the solicitation of the
stockholders of the Company in connection with the proposed merger,
and their direct or indirect interests, by security holdings or
otherwise, which may be different from those of the Company’s
stockholders generally, is set forth in the definitive proxy
statement and the other relevant documents filed with the SEC. You
can find information about the Company’s executive officers and
directors in its Annual Report on Form 10-K for the fiscal year
ended February 1, 2013 (as amended with the filing of a Form 10-K/A
on June 3, 2013 containing Part III information) and in its
definitive proxy statement filed with the SEC on Schedule 14A on
May 24, 2012.
About Dell
Dell Inc. (NASDAQ: DELL) listens to customers and delivers
worldwide innovative technology, business solutions and services
they trust and value. For more information, visit www.Dell.com. You
may follow the Dell Investor Relations Twitter account at:
http://twitter.com/Dellshares. To communicate directly with Dell,
go to www.Dell.com/Dellshares.
Media Contacts for the Special Committee:Sard Verbinnen
& CoGeorge Sard/Paul Verbinnen/Jim Barron/Matt
Benson212-687-8080
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