Icahn Has Funding To Keep Dell Public; Channel Hopes Dell Stays On Private Course

Carl Icahn

Investor Carl Icahn and his investment partners on Monday said they have the funding needed to challenge Dell's move to become a private company.

However, while Icahn and his allies battle over the future of Dell with Dell's CEO Michael Dell and his principal ally Silver Lake Partners over the company's move to go private, channel partners continue to hope Dell does go private as a way to transform itself into an enterprise solution provider.

Icahn, chairman of Icahn Enterprises, on Monday issued an open letter to Dell shareholders and the Dell Special Committee focused on reviewing strategic alternatives for Dell in which he said the $5.2 billion in debt financing has been raised from lenders.

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"With that we put an end to the unwarranted speculation by Dell that our money would not be available," Icahn wrote.

Icahn -- who, along with Southeastern Asset Management, is currently battling Dell over that company's bid to go private -- said his strategy, which includes offering $14 per share to most shareholders while keeping Dell a public company, is superior to CEO Michael Dell and his investment partners' original offer to pay $13.65 a share for all shares and then turn Dell into a private company.

For solution providers, seeing Dell become a private company and carrying through on a move to transform itself from a PC company to a provider of enterprise solutions is the key to the long-term viability of Dell and their success partnering with the company.

As a company that partners exclusively with Dell, Davenport Group has a ringside seat in the vendor's transformation, said Sonia St. Charles, CEO of the St. Paul, Minn.-solution provider.

"I think it would be a shame if [Michael] Dell was not there to oversee the transformation," St. Charles said. "Not that Carl Icahn or someone else couldn't manage it. But, it would be slower. We believe Michael Dell is still the best person to oversee the transformation."

Michael Tanenhaus, principal at Mavenspire, an Annapolis, Md.-based solution provider and Dell partner, said there will ultimately have to be a decision made about Dell's leadership.

"With Carl Icahn, you know he will change the leadership," Tanenhaus said. "It will lead to confusion in the channel. Dell is in the midst of a huge transformation, similar to the one that IBM went through. But, IBM was much larger and had the resources to better manage it."

NEXT: Keeping An Eye On Dell's Transformation

Dell, unlike IBM in the past, is being highly watched in a competitive environment, making it hard for the company to make the necessary changes while its top competitors and investors watch every move, Mavenspire's Tanenhaus said.

"As a partner, do I think Dell can do all the things it needs when the competitors read all the reports?" he said. "I don't know. I'm sensitive to the idea that shareholders may not get a better deal if Dell goes private. But as a partner, I'm personally for privatization of Dell. They've been clear on their strategy. I prefer the knowing vs. the not knowing."

Icahn, who last month compared Dell's method of shopping for superior offers for the company's shareholders to selling a home by advertising it as having termites, wrote that his allies now have $5.2 billion in committed debt financing, $7.5 billion from cash on the Dell balance sheet, and $2.9 billion that can come from the sale of receivables.

That, Icahn wrote, is a total of the $15.6 billion needed for a tender offer of 1.1 billion Dell shares at $14 per share, which would still leave Dell with $4.9 billion in cash remaining.

However, he said, he and Southeastern Asset Management have agreed not to take advantage of the $14 tender offer, which means that stockholders should be able to get $14 per share for at least about 72 percent of their Dell stock.

"[They would get] an even higher percentage if other stockholders believe, like us, that Dell's best days are ahead of it and decide to hold onto their Dell shares," he wrote.

The Dell Special Committee, in a Monday statement, responded to Icahn's latest moves, stating that "The Special Committee has reviewed Mr. Icahn's open letter and will be pleased to review any additional information, including financing commitments, that it may receive from him regarding his recapitalization proposal. The Committee remains committed to achieving the best outcome for all Dell shareholders."

PUBLISHED JULY 1, 2013