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The special board committee overseeing the $24.4 billion management-led buyout of
In a shareholder presentation made public this morning in a SEC filing, the committee tried its best to squash any interest in Icahn's alternative to the buyout, saying Icahn "lacks credibility" and that he has been "inconsistent" in his offers.
True, Icahn has tried a number of maneuvers to win over Dell shareholders. He last week proposed a $14-a-share tender offer that would let weary investors cash out at a higher price than the $13.65 a share offered in the buyout by billionaire founder Michael Dell and private equity shop Silver Lake Partners. Before, Icahn and his ally Southeastern Asset Management put forth a different type of leveraged recapitalization, one involving a special dividend of $12 a share in cash or stock that would also allow shareholders to exit.
And, the committee says, Icahn's math still stinks. It estimates that Icahn would need up to another $2.9 billion than he estimates to complete the leveraged recap. That's a slight improvement from before, when the committee concluded Icahn was short $3.9 billion in his original proposal. The funding gap, according to the presentation, could force Icahn's tender offer to as low as $8.15 a share.
So far, financing has been a major sticking point in the battle for the PC maker. Icahn has said a "major investment bank" would provide $1.6 billion and he would invest $2 billion; the deal would be completed by existing cash on hand and additional debt. But the Dell committee says Icahn isn't accounting for the $1.4 billion debt payment that Dell must make next April and that he doesn't understand how much cash the company needs to operate.
Dell is struggling to transform itself into a more profitable, more nimble company, a situation faced by other aging tech giants like
That the committee took another opportunity today to dismiss Icahn isn't at all surprising. It has already endorsed the Dell-Silver Lake buyout as the superior offer, saying the PC maker will be able to regroup easier in private rather than as a publicly traded company. Icahn, meanwhile, has pledged to fight the deal, urging investors to vote against the buyout.
The timing of the presentation's release is conspicuous, falling on the same day that the committee, as well as Icahn and Southeastern, make their case to Institutional Shareholder Services. I.S.S., the biggest proxy adviser, could sway how some large institutional shareholders vote next month.
A critical matter for Icahn and Southeastern. To win, Icahn and Southeastern must win over the big institutions that have a stake in Dell (UBS, T. Rowe Price, Vanguard and Citi all own major positions). Icahn, the world's 26th richest person with a $20 billion fortune, is the second largest Dell shareholder, behind only Michael Dell. Southeastern is the fifth largest, after recently selling half its stake to Icahn.
Reach Abram Brown at abrown@forbes.com.
