Dell Inc's special committee asked Carl Icahn for details on his plan to
make the computer maker pay dividends and issue shares rather than sell
itself to its founder, as the activist investor unveiled candidates for
a new board.
Icahn and Southeastern Asset Management Inc, his ally in
a battle with founder Michael Dell over the future of the world's No. 3
PC maker, on Monday put forward 12 Dell board of director candidates,
including Icahn himself.
Last week, Icahn and Southeastern offered
$12 in cash per share or additional shares to existing investors as an
alternative to Michael Dell's $24.4 billion bid to take the company
private. And the billionaire investor warned that if his leveraged
recapitalization proposal was rejected, he would rally shareholders to
vote down the Dell founder's offer and put up his own roster of
candidates for the board.
Icahn's plan assumes that as much as 80
percent of the company's shareholding will opt for a cash payout,
translating into a maximum outlay of $16.8 billion.
major shareholders such as Southeastern and Icahn are waging a battle
over the future of the company, once a tech-industry high flyer but now
struggling to evolve as people embrace smartphones and tablet computers.
Dell and private equity firm Silver Lake want to take the company
private for $13.65 per share, but stockholders, including Southeastern
and T. Rowe Price Group Inc, have complained that offer severely
undervalues the company.
Instead, Icahn and Southeastern, two of
Dell's biggest investors, proposed to give stockholders $12 cash or
shares for every share they own, as well as allow them to keep their
The alternate board proposed by the two groups includes
Bernard Lanigan Jr., chief executive of Southeast Asset Advisors: Rahul
Merchant, New York City's chief information officer, and Jonathan
Christodoro, managing director at Icahn Capital.
A spokesman for
Merchant said he had received New York City's approval for his
nomination on condition that he recuse himself from any dealings with
Dell or any company affiliated with Southeastern in order to avoid any
conflict of interest.
Other nominees include Icahn Enterprises
President Daniel Ninivaggi, who previously sat on the board of Motorola
Mobility Holdings, and Harry Debes, a technology veteran who is
currently an operating partner with buyout firm Advent International
Shareholders last week welcomed the alternative proposal,
which they said sustained a discussion around Dell's future. But
investors might find the latest option on the table unpalatable because
of a lack of specifics, some analysts say.
would prefer the certainty of $13.65 in cash rather than risk the
uncertainty and the ensuing stock volatility," Jefferies & Co
analyst Peter Misek wrote in a Monday research note. "Our estimates
point to possible minimal upside to the $13.65 Silver Lake offer, which
we do not think would warrant the potential volatility."
Icahn is being advised by investment bank Jefferies Group.
a letter to Icahn, the committee said it was not clear if he intended
to make "an actual acquisition proposal that the board could evaluate,"
or if he intended his offer as an alternative in the event the pending
sale to Silver Lake and Michael Dell is not approved.
Dell shares ended regular trading on Monday at $13.52, up 0.5 percent.
and Southeastern's challenge comes after Blackstone Group LP ended its
pursuit of Dell in April and pulled out a month after it teamed up with
Icahn to challenge the take-private attempt.
Icahn argued in a
letter sent to the board and made public in a filing on Friday that Dell
operates a large enterprise-focused computing business in addition to
its ailing PC division, with strong ties Microsoft Corp and Intel Corp.
specifying details, he also said cost savings could be had from merging
assembly plants across the world, while there remained opportunities to
spin off non-core businesses.
Apart from asking who would make up
the company's senior management team under Icahn, the committee said in
its Monday letter that it wanted to know his "strategy and operating
The committee also asked for information on the terms of
the debt financing required for Icahn's proposal and "contingencies
available if cash on hand or stockholder rollovers are less than
anticipated," as well as financing commitment letters.
It said the
proposal did not seem to take into account the additional borrowing
required if Icahn uses the company's cash in the transaction and reduces
future cash flow by selling receivables. In addition, it asked for an
analysis of whether the receipt of additional shares would be taxable.
It also wanted to know more about the relationship between Icahn and Southeastern.
Icahn was not available for comment.
Both Icahn and Southeastern said they would finance the proposal from existing cash and about $5.2 billion in new debt.
and Southeastern together hold about 12 percent of Dell stock. The
billionaire investor previously proposed paying $15 per share for 58
percent of Dell.
(Also see: Dell takeover battle: All you need to know)
© Thomson Reuters 2013