It Ain't Over Yet: Icahn, Southeastern Demand That Dell Give Shareholders A Choice


It's not over till it's over, and the drama surrounding Dell's proposed leveraged buyout ain't over yet.

The Dell board of directors received another letter from Carl Icahn and Icahn Enterprises, along with Southeastern Asset Management, with an alternative proposal to Dell's $24.4 billion agreement to go private through Silver Lake Partners and other investors.

Under their new proposal, shareholders would get an option to keep the stock or take an additional $12 a share in cash or stock, according to a filing with the Securities and Exchange Commission.

 

Related: Behind The Scenes Of Dell's Decision To Go Private: Part II

Icahn and G. Staley Cates, president and chief investment officer of Southeastern Asset Management, said they would finance the proposal with existing cash at Dell and approximately $5.2 billion in new debt. They note that the current proposal provides for about $16 billion of debt.

"We believe that our proposal is superior to the going private transaction in that under our proposal, shareholders can receive $12 in cash and still share in the future of Dell, an opportunity that we think is worth significantly more than $1.65 per share," the letter stated.

Cates and Icahn also wrote they want the board to hear "loud and clear that 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."

The letter to Dell's Special Committee continued: "You not only sanctioned Michael Dell's offer, which amazingly allows him to purchase the company from shareholders with their own money but, to add insult to injury, you have agreed to give Mr. Dell a break-up fee of up to $450 million. We are often cynical about corporate boards but this board has brought that cynicism to new heights."

Both Icahn and Southeastern Asset Management have been vocal opponents of the Silver Lake Deal, which calls for an outright purchase of all shares at $13.65 per share. Dell's stock had traded well above that point for much of the spring after investors expected higher bids to come in, but Icahn, as well as The Blackstone Group, eventually withdrew their bids after the go-shop period ended. Thursday, Dell's stock closed at $13.32 per share.

A Dell spokesman issued a statement that said, "The Special Committee of the Dell board is reviewing the Southeastern Asset materials and will provide comment in due course."

In a previous letter, Icahn had warned Dell's board of "years of litigation" if it followed through with the Silver Lake deal. Icahn previously had submitted a bid for Dell, but later withdrew it, citing concerns with the PC market after Dell announced its earnings.

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