Dell Asks Carl Icahn For Specific Details On His Offer

Posted May 13, 2013

Today Dell’s special committee asked Carl Icahn what the details are for his plans to acquire the computer maker company.  The details Dell requested include how he would finance the offer and who would run the company.  Carl Icahn and Southeastern Asset Management offered $21 billion in cash to keep the company public.  This deal rivals the $24.4 billion deal that Dell founder Michael Dell offered for the company.

Michael Dell partnered with private equity firm Silver Lake and Microsoft Corporation for his deal at a price of $13.65 per share.  Stockholders including Southeastern and T. Rowe Price believes that Michael Dell’s offer undervalues the company.  Icahn and Southeastern would give stockholders $12 of cash for every share they own and allow them to keep their stock.

Dell’s special committee said that it was not clear if he intended to make “an actual acquisition proposal that the Board could evaluate” or if he intended his offer as an alternative in case the pending sale to Silver Lake and Michael Dell is not approved.

Dell’s special committee also asked Icahn for information on the terms of the debt financing required for Icahn’s proposal and “contingencies available if cash on hand or stockholder rollovers are less than anticipated” along with financing commitment letters.  Dell said that the proposal did not appear to take account for additional borrowing required if Icahn uses the company’s cash in the transaction and reduces future cash flow by selling accounts receivable.  Dell also asked for an analysis of whether the receipt of additional shares would be taxable.

Dell wants Icahn to provide a “strategy and operating plan” and to provide details about the relationship he has with Southeastern.  Icahn and Southeastern said that they would finance the proposal from existing cash and $5.2 billion in new debt.  Icahn and Southeastern together hold around 13% of Dell’s stock.

Private equity company Blackstone was also in the race to acquire Dell, but dropped out last month because of a lag in PC sales and the company’s financial picture.