Carl Icahn Has Raised $5.3 Billion to Finance His Plan to Recapitalize Dell
Activist investor Carl Icahn has apparently raised more than the $5 billion he needs to finance his plan to carry out a recapitalization of the computer maker Dell, a plan he argues will be worth more to the company’s shareholders than the $24.4 billion leveraged buyout proposed by CEO Michael Dell and the private equity firm Silver Lake Partners.
With the July 18 proxy vote looming, Icahn, who last month became Dell’s second largest shareholder after Michael Dell, has proposed a few different variations of a plan that would use Dell’s existing pile of cash to pay out a special dividend to shareholders, lever the company up with new debt and leave a portion of it publicly traded. Icahn’s argument has been that current shareholders — not just Michael Dell and Silver Lake — should get a chance to profit on an eventual turnaround in the company’s fortunes.
The problem — at least until now — is that the special committee of Dell’s board overseeing its go-private process has criticized the Icahn proposal, saying it suffered from a “liquidity gap” of about $4 billion. With about $5.3 billion in financing arranged by investment bank Jeffries, that problem appears to be solved. The financing was reported by CNBC’s David Faber, just a little while ago. (See the video of Faber’s report below.)
Don’t expect much support from Dell’s board, which has repeatedly thrown its weight behind the Michael Dell-Silver Lake plan, and has criticized the various iterations of the Icahn plan as “inconsistent.”
The next big step in the process will come when the proxy advisory firm Institutional Shareholder Services issues its recommendations on which deal — if any — it thinks shareholders should support. The meetings with ISS and Glass Lewis, another proxy advisory firm, took place last week. According to people close to the deal process, ISS isn’t expected to publish its opinion until after the July 4 holiday weekend. As I argued last month, the recommendation will carry a lot of weight with certain shareholders. Since Michael Dell can’t vote, that means about 42 percent of shareholders will have to vote affirmatively in favor of one plan or the other.
Shareholders representing about 18 percent of the proxy, including Icahn, Southeastern Asset Management and mutual fund firm T. Rowe Price, are already on record as opposing the Dell-Silver Lake bid, which values the company at $13.65 a share. It may be close.