With the vote on Dell's future less than three weeks away, investor Carl Icahn is again pressing the company's board of directors to consider his bid superior to that of CEO Michael Dell and private equity firm Silver Lake Partners.
In an open letter to Dell shareholders and the board's special committee overseeing the bids for the world's third-largest PC maker, Icahn said he and partner Southeastern Asset Management have gotten the necessary funding to pursue their plans to acquire Dell. Icahn reiterated that his bid is superior to Michael Dell's because it not only offers more money per share, but also lets investors stick with the company if they want.
Icahn, now that he has gotten more than $5 billion in financing for his bid, is demanding that the special committee meet with him and to call his offering superior to Michael Dell's $24.4 billion bid, or at least pull back its recommendation to shareholders to support Michael Dell's offer.
In a brief response, Dell's special committee said it "has reviewed Mr. Icahn's open letter and will be pleased to review any additional information, including financing commitments, that it may receive from him regarding his recapitalization proposal. The committee remains committed to achieving the best outcome for all Dell shareholders."
The committee in the past has said there were concerns about whether Icahn and Southeastern could come up with the necessary funding for their bid.
Dell in February announced the bid by Michael Dell and Silver Lake to buy the company and take it private in an effort to speed up the company's transformation from a PC maker to an enterprise IT solutions and services provider. Dell has spent billions over the past several years buying dozens of companies to build up its capabilities in such areas as storage, networking, software and security. Michael Dell has argued that it would be easier to continue the transformation effort away from the scrutiny of Wall Street.
Some of Dell's largest investors, including Icahn, Southeastern and T. Rowe Price, have argued that Michael Dell's $13.65-per-share offer greatly undervalues Dell, and have vowed to vote against the deal during a July 18 special meeting. Icahn and Southeastern are offering to buy up to 72 percent of Dell's shares for $14 apiece, and Icahn has said that if he gains control of the company, Michael Dell would not remain CEO.
Also, Icahn pushed the special committee to designate his offer superior in such a way as to ensure that Silver Lake wouldn't get a $270 million breakup fee if the $24.4 billion offer fails.
In his letter, Icahn noted that Dell executives, during a recent conference call with analysts and journalists to discuss quarterly financial results, said the company was pursuing lower PC prices that could hurt the bottom line in the short term, but with the idea of gaining new customers that could help over the long haul.
Icahn said he supported the idea, but questioned why—when there is very good potential for growth—would Dell's board of directors support Michael Dell's bid, which would make it impossible for shareholders to benefit from that growth.
"We believe that it would be a sad outcome for stockholders and would, to say the least, reflect terribly on all who are involved in this process if, after purchasing shares at what we perceive to be a substantially undervalued price of $13.65 per share, Michael Dell and Silver Lake earned substantial returns on their investment while other stockholders are forced to sell," he wrote. "It would be even worse if Dell were sold (or broken up) by Michael Dell and Silver Lake in a transaction or transactions with one or more strategic acquirers for a very large profit."
Dell shareholders now are waiting on the opinion of Institutional Shareholder Services on the Michael Dell bid, which would give Dell shareholders some guidance.