(Adds comments from Dell special committee)
By Ben Fox Rubin
Carl Icahn stepped up his bid to take control of Dell Inc.
(DELL), disclosing he has nearly doubled his stake in the ailing PC
maker while also calling for the company to launch a $14-a-share
tender offer for 1.1 billion shares.
Dell's special committee, in response, said it is reviewing the
proposal--calling it a "further deviation" from Mr. Icahn's
original offer--and saying the transaction isn't one it can endorse
and execute.
The new proposal calls for Dell to launch a tender offer for up
to $16 billion of its shares--more than half of the company's
market value--as an opposing option to founder and CEO Michael Dell
and Silver Lake Partners's go-private offer for the ailing PC
maker.
Mr. Icahn also said his company purchased about 72 million Dell
shares from Southeastern Asset Management, another group critical
of the go-private offer, making him the second-largest holder in
the company after its founder.
Mr. Dell's $24.4 billion buyout offer, worth $13.65 a share, has
been sharply criticized by some shareholders as undervaluing the
company since it was unveiled in February. Shareholders are set to
vote on the deal July 18.
Mr. Icahn said his proposal for a tender offer worth $14 a share
"allows those who believe, like us, that the $13.65 price being
offered in the Michael Dell/Silver Lake going private transaction
significantly undervalues Dell, to continue to hold Dell shares. It
also provides an opportunity for those who wish to tender at $14 a
share to do so."
Mr. Icahn and Southeastern agreed not to tender to the
offer.
In a statement, Dell's special committee said the new deal
potentially forces shareholders to continue to own shares in the
highly leveraged company that would result. It said Mr. Icahn's new
concept doesn't adequately address the liquidity issues and other
risks the committee previously highlighted, and that it continues
to recommend the $13.65 per share deal.
Icahn said financing for the tender offer would be provided from
$5.2 billion of debt financing, together with $7.5 billion in cash
at Dell and $2.9 billion through a sale of receivables. This would
leave about $4.9 billion of cash available for ongoing Dell
operations.
He said his firm is working on obtaining commitments for $5.2
billion of senior debt financing as a bridge loan to guarantee the
tender offer, adding a major investment bank has indicated its
willingness to provide $1.6 billion, while Mr. Icahn and his
affiliates would offer $2 billion, if necessary.
"To preempt the repetition of the criticisms the company made
regarding our prior plan, we believe the company will have ample
liquidity and capital to make the tender offer and run the business
well," Mr. Icahn wrote.
He called for the defeat of Mr. Dell and Silver Lake's offer at
the meeting and then the election of Mr. Icahn's slate of
directors, who will implement the new tender offer for about 1.1
billion Dell shares. Dell currently has about 1.76 billion shares
outstanding, according to FactSet.
Carl Icahn and Southeastern have proposed other alternative
offers, recently proposing giving Dell shareholders the option to
keep holding stock in the company and take an additional $12 a
share in cash or stock. The cash-or-stock dividend would cost more
than $21 billion.
In proxy material filed last month, Dell reiterated why the
proposed go-private deal is the best option for shareholders,
saying "in a challenging business environment it offers certainty
and a very material premium over pre-announcement trading prices"
and that it shifts "very substantial risks to the buying
group."
Also last month, Dell said its fiscal first-quarter earnings
dropped 79%, missing Wall Street expectations, as the company
reported weaker revenue in its computing segment.
Dell shares rose 7 cents to $13.48. The stock is up 33% so far
this year.
--Debbie Cai contributed to this report.
Write to Ben Fox Rubin at ben.rubin@dowjones.com
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