Dell Lands Even Higher Buyout Offer from Michael Dell

Jacob Harper  |

The months-long war between Michael Dell and billionaire corporate raider Carl Icahn over the fate of beleaguered PC maker Dell Inc. (DELL) heated up on Aug. 2, as Dell won an important battle that solidified his chances of taking the company private. Dell raised his buyout offer, previously at $13.65 a share, and was able to secure more time to lobby shareholders on his offer. The vote, which was originally supposed to take place July 18 and was already postponed once, was supposed to take place Aug 2, then was postponed again, and is now rescheduled for Sep. 12.

And all reports indicate the special committee set to vote on the buyout offer is going to go with Dell. Icahn had previously excoriated the board for even considering the offer. Icahn’s plan for the future of Dell differs wildly from Michael Dell’s: Icahn wants to keep the company public, and has offered a higher buy out price. But Icahn’s plan would also take on a heavy amount of debt, which leaves many investors leery.

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Dell’s new offer only raises the buyout price to $13.75 per share, but it also and adds a special dividend of 13 cents per share, at or before the closing of the deal, that would be personally financed by dell himself out of his own pocket.  Dell’s plan would take the company off the market to refocus the company’s strategy. The company has fallen on hard times as the American public shies away from PCs.

Dell and Icahn have been going back and forth since early 2013. Icahn, famous for his brusque manner and blunt appraisals, has not been one to mince words every time the voting committee balks at one of his offers. In response to the delay, Icahn sued Dell on Aug. 2 to keep the committee from stalling on the vote.

Icahn is far from done, however. Also revealed on Aug. 2 was that the price of breaking up the deal would go down from $450 million to $180 million, making Icahn’s rival offer slightly more feasible. Icahn tweeted that on that front, they had "won the battle" but the war was far from over.

Whichever offer the special committee goes with, it is imperative for stockholders that one of them goes through. Without a buyout, according to analyst Jason Noland of W. Baird & Co. the company could spiral out and “could go to $8 a share or lower.”

Dell stock shot up on Dell and Icahn’s squabbling. It’s up 5.33 percent to $13.65 a share amid four times normal volume.  

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