Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Icahn Proposes $14 Dell Tender Offer, Becomes Second-Largest Shareholder

carl_icahn_featureCarl Icahn has stepped up his campaign to take control of Dell, proposing that the company make a tender offer of 1.1 billion shares at $14 a share.

The offer would be 35 cents per share higher than the $13.65 offered by CEO Michael Dell and the private equity firm Silver Lake Partners.

Icahn also disclosed that he has purchased more than 72 million Dell shares from Southeastern Asset management, the Memphis-based investment fund that is Dell’s largest outside shareholder. That purchase makes Icahn Dell’s largest shareholder, with 152 million shares, amounting to about 8.7 percent of shares outstanding, and second only to Michael Dell himself.

Dell shares rose slightly to $13.46 a share.

Icahn was reported last week to be close to taking his chips off the table and walking away from the fight. He and Southeastern had previously proposed a plan to recapitalize Dell, leave some of the company trading publicly in a so-called stub, and offering shareholders a special $12-per-share dividend financed by existing cash and new debt.

The special committee of Dell’s board has criticized the Icahn plan, saying it suffers from a liquidity gap of about $4 billion.

In his latest letter, Icahn says that funding for the tender offer would be provided from $5.2 billion in debt financing plus $7.5 billion in cash that Dell has on hand, combined with $2.9 billion that would come from the sale of Dell receivables.

This would, he argues, leave $4.9 billion worth of cash to fund Dell’s ongoing operations.

He also said: “We are proceeding to obtain commitments for $5.2 billion of senior debt financing to be made available to Dell as a bridge loan to guaranty the tender offer and believe that we are on target to achieve that result. A major investment bank has indicated its willingness to make available $1.6 billion and Carl Icahn and his affiliates would make available $2 billion if necessary to facilitate this commitment.”

Update: CNBC just reported that the investment bank behind the $1.6 billion in financing is Jeffries.

The proxy vote is now exactly 30 days away, and it’s worth remembering that proxy advisory firms Institutional Shareholders Services and Glass Lewis have yet to weigh in on the deal, because, as I argued on Sunday, their opinions will carry a lot of weight with institutional shareholders.

Here’s the statement I just received from Southeastern:

“Southeastern Asset Management continues to believe that the Michael Dell / Silver Lake management buyout proposal undervalues the company and its prospects going forward.

“Southeastern and Icahn Associates have been working diligently to provide a better alternative for shareholders. Southeastern has determined that Icahn is in the best position to lead the development of an alternative transaction and to generate a better outcome for shareholders. Southeastern has therefore agreed to sell approximately 72,010,328 shares to Icahn, making Icahn the largest outside shareholder of Dell.

“Southeastern intends to vote its approximately 72,010,328 remaining shares of Dell stock against the $13.65 Michael Dell / Silver Lake management buyout proposal. Furthermore, Southeastern intends to vote its shares at Dell’s Annual Meeting in favor of the slate of highly qualified director candidates it and Icahn submitted to the Company. Icahn has Southeastern’s full support as it leads the proxy fight in the interest of all shareholders against the undervalued management buyout proposal. Southeastern will continue to participate in the proxy contest with Icahn to defeat the Michael Dell / Silver Lake management buyout proposal.”

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