Carl Icahn’s Valuations of Company Are “Unrealistic,” Dell Says
As I mentioned in this morning’s post summarizing the many moving parts of the Dell buyout endgame, Dell had filed some new materials with the U.S. Securities and Exchange Commission, arguing among other things that Carl Icahn’s estimates about how much the company is worth are unrealistic. The filing was made in response to questions from Institutional Shareholder Services, which is expected to publish an opinion on the buyout proposal next week.
I grabbed a copy of the new slide deck, and you can read it below. The crux of the new material is on pages nine through 12. In it, the company argues that Icahn’s assumptions about Dell, in a sum-of-the-parts valuation when compared to other companies, are out of whack. The key point is that there’s no way Dell can be worth 12 times its EBITDA when its nearest competitors are trading at less than five times.
It breaks down certain segments, including its enterprise group and its services group, which it also argues Icahn has overvalued. Microsoft and EMC are trading at seven times forward EBIDTA, so it doesn’t follow, Dell argues, that the enterprise business can be trading for more than 15 times. CSC, it says, trades for four times forward EBITDA, whereas Icahn assumes its worth closer to eight times EBIDTA.
Finally, it says that if the buyout proposal fails a shareholder vote, then those very same shareholders might end up seeing the value of their shares fall considerably. If Dell was trading at the same multiples as Hewlett-Packard, it would, based on various assumptions, be trading at anywhere from $5.85 a share to $8.67 a share, much lower than the $13 and change it has been.
And about that: Just for the record, Dell shares opened lower by more than one percent today. As of 10:20 am ET, they were trading at $13.13, down by 1.4 percent from Wednesday’s close.
Here’s the latest presentation, which you can read for yourself: