Icahn Calls Michael Dell's 'Go-Shop' Moves Akin To Advertising House With Termites

Activist investor Carl Icahn publicly scolded Dell for publishing negative news about itself even as it was trying to solicit buyout offers as part of its bid to go private.

Icahn, in a Tuesday open letter to Dell shareholders, also said he has purchased half of the Dell shares held by Southeastern Asset Management, his partner in his own bid for control of Dell.

He also tried to dispel concerns that he and Southeastern Asset Management would be unable to fund their own offer to keep Dell a public company.

[Related: Three Current, Former HP Execs On Icahn's Short List To Run Dell: Reuters ]

Icahn, who with Southeastern Asset Management is currently battling Dell over that company's bid to go private, used his letter to scold Dell for using its "go-shop" period to solicit privatization bids while spending efforts on "negatively positioning" the company. Icahn called it a way for Dell's board of directors to reject his proposal to provide Dell shareholders with $12 dollars per share and new shares worth $1.65 each in lieu of CEO Michael Dell's original plan to go private by buying the shares outright for $13.65 each.

Instead, Icahn wrote, the only shortfalls in Dell come from "poor execution" in the first half of the year, including starting a PC price war two months before announcing the privatization bid, granting retention cash bonuses to employees, pre-paying debt and negotiating a high break-up fee for Michael Dell and Silver Lake, partners in the privatization bid.

"Is that how the supposed 'go-shop' was conducted? Can you imagine a real estate broker running advertisements warning of termite danger in a house each time a prospective buyer seems interested?" he wrote.

Icahn in his letter proposed that Dell give shareholders a tender offer for about 1.1 billion Dell shares at $14 per share, with Icahn and Southeastern not to tender in the offer. That, he wrote, would give shareholders the opportunity to sell 72 percent or more of their shares at that price.

Funding for the offer would include $5.2 billion of debt financing, $7.5 billion in cash available at Dell after taxes and fees, and $2.9 billion available through a sale of Dell receivables, leaving about $4.9 billion of cash available for ongoing Dell operations, he wrote.

NEXT: Icahn Strengthen His Hand With 72-million-share Dell Purchase

Icahn also wrote that his own company has purchased about 72 million shares of Dell from Southeastern Asset Management.

Attached to Icahn's letter was a separate letter dated June 17 in which Icahn wrote that Dell has made it "effectively impossible" for its board to proceed with his planned recapitalization of Dell by defining the term "Superior Proposal" in such as way that no proposal other than the original one from Michael Dell and Silver Lake would be suitable.

He also proposed that Dell hold a combined 2013 Annual Meeting and a Special Meeting to vote on the merger rather than holding the Special Meeting on July 18 and the Annual Meeting afterward. He said that, by holding the two meetings separate, Dell does not give its shareholders the opportunity to vote between multiple proposals for privatizing or recapitalizing Dell, and that the shareholders "may thereby be coerced to vote for the Michael Dell/Silver Lake deal."

Dell declined to respond to Icahn's letters other than to provide a canned statement that read, "As the board's special committee continues to oversee its process, we remain focused on our customers and on providing innovative products and solutions to help them succeed and better compete."

PUBLISHED JUNE 18, 2013