Activist investor Carl Icahn and Southeastern Asset Management Inc, two of Dell Inc's
biggest shareholders, have proposed an alternative to a $24.4 billion
buyout led by founder Michael Dell that will take private the world's
No. 3 PC maker.
Michael Dell, major shareholders such as Southeastern
and billionaire Icahn are waging a battle over the future of the world's
third largest personal computer maker, once a tech-industry high flyer,
but now struggling to evolve as people embrace smartphones and tablet
Michael Dell and private equity firm Silver Lake want
to take the company private for $13.65 per share, making it the largest
private equity-led buyout since the 2008 financial crisis.
Icahn and Southeastern proposed an alternative to a take-private buyout
that lets shareholders get $12 of cash for every share they own, as well
as keep their stock. Given that they retain their stake in the company
and that the rival offer is for $13.65 a share, every stock owned takes
on a value of $1.65, Icahn and Southeastern argue.
At $12 apiece, the cash portion of Icahn's and Southeastern's offer will come to $21 billion.
The initial reaction from shareholders to the rival proposal was favorable.
improvement. It gives people a choice. The other (proposal) comes
across like a ramrod," said Donald Yacktman, founder and CEO of Yacktman
Asset Management, holds 14.8 million shares, according to Thomson
"Whichever way things evolve, what this is doing is forcing better capital allocation than we have seen in the last five years."
T. Rowe Price and other major investors in the company have publicly
criticized Michael Dell's buyout as severely undervaluing a company that
still operates a large enterprise-focused computing business in
addition to its ailing PC division.
Icahn's offer "gives us the
opportunity to continue our participation in Dell's operating business
and thus we believe it to be superior," said Tim Piechowski, associate
portfolio manager, Alpine Capital Research, St Louis, Missouri, which
owned 2.2 million shares as of December 31.
Dell shares were up 1.2 percent at $13.48 in afternoon trading.
TAKING IT PERSONALLY
told Reuters on Friday he will personally contribute a couple billion
dollars to finance a $5.2 billion bridge loan needed to effect his deal.
He added that he had already reached out to several investment bankers.
Later, he told CNBC in a TV interview that one of those investment
banks included Jefferies.
Icahn and Southeastern said in the
letter it was "insulting to shareholders' intelligence for the board to
tell them that this board only has the best interests of shareholders at
heart. We are often cynical about corporate boards but this Board has
brought that cynicism to new heights."
The Icahn and Southeastern challenge comes after Blackstone LP ended its pursuit of Dell in April, pulled out a month after it teamed up with Icahn to challenge the take-private attempt.
said in a statement on Friday that its special committee is reviewing
the Southeastern Asset materials and will provide comment in "due
course." A representative for Silver Lake declined to comment.
don't think Icahn and Southeastern have enough sway over the
shareholders," Raymond James analyst Brian Alexander said. "As Dell has a
lot of cash, (the latest deal) is basically like a leveraged private
equity deal, without the company going private."
Southeastern said that, if Dell's board pursues the go-private offer
with a shareholder vote, they will put up a slate of 12 directors to
challenge the current board. In an interview with CNBC on Friday, the
activist investor said Michael Dell will no longer run the company
should his slate of candidates be elected.
Both Icahn and
Southeastern said they would take additional shares rather than cash.
They would finance the proposal from existing cash and about $5.2
billion in new debt.
Icahn and Southeastern together hold about 13
percent of Dell stock. The billionaire investor previously proposed
paying $15 per share for 58 percent of Dell.
"As a shareholder,
what I'm most pleased about is that the pot continues to be stirred,"
said Robert Willis, president and CEO of Willis Investment Counsel in
Gainesville, Georgia, which owns about 350,000 shares of Dell. "I like
the fact that those who oppose this aren't going to lie down."
© Thomson Reuters 2013