Dell’s Board Attempts to Poke Holes in Icahn/Southeastern Buyout Proposal

Michael Teague  |

A special committee of Dell’s (DELL) board issued a presentation on Wednesday that adds yet another twist to the buyout saga between Carl Icahn and Southeastern Management on the one hand and the company’s founder Michael Dell and Silver Lake Management on the other.

The committee warned the company’s shareholders in a report that accused the legendary activist investor of being $4 billion shy of the funds needed to make good on his plan to let the company’s investors retain their shares in addition to either $12 per share in cash, or $12 dollars of additional stock.

Dell and Silver Lake have been defending their longstanding proposal to buy the company and take it private in a $24.4 billion dollar deal that would give shareholders $13.65 per share. Dell’s board warned that the Icahn plan could “reduce the promised $12.00 per share special dividend to $9.35 per share—and to $8.50 per share if Icahn/Southeastern are the only shareholders electing the equity stub instead of cash.”

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The board also sought to reassure shareholders in Wednesday’s SEC filing that Michael Dell’s buyout plan offers a sure premium, and would leave Dell and Silver Lake holding all the risks. Icahn, for his part, has argued that his plan with Southeastern would allow the double benefit of offering shareholders a premium, while allowing them to keep their equity in the company and participate in its recovery.

Dell’s shareholders will meet on July 18th to vote on the Silver Lake proposal, and Icahn/Southeastern have threatened to nominate 12 new directors to edge out the company’s current board if their plan is nixed.

Formerly a world leader in PCs and laptops, Dell has had much the same difficulties as other PC giants in making the swift transition needed to keep up with the explosion of mobile devices and cloud computing services that has come to define today’s computing market. Michael Dell would like to take the company private so that he can closely implement and supervise a turnaround plan without the distractions that come with being a publically traded company.

Dell ended the day at a gain of 0.07 percent to $13.43, a far cry from the $54 per share the company reached just after the beginning of the new millennium.

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