Activist investor Carl Icahn has raised his stake in computer maker Dell and told investors that the company would offer them $14 per share if they participate in his bid to foil the buyout attempt by founder Michael Dell.
The offer of $14 a share, which Icahn says the company would pay if his plan to name a new board succeeds, tops the $13.65 offered by the company’s founder and his ally, investment firm Silver Lake. Dell investors are set to vote on the composition of the board at the July 18 shareholder meeting.
‘Our proposal 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,’ Icahn says in an open letter to investors. ‘It also provides an opportunity for those who wish to tender at $14 a share to do so.’
Icahn also announced that he has bought half of the Dell stake owned by Southeastern Asset Management, or 152 mn shares, making him the largest external shareholder in the Texas-based company.
Southeastern supports Icahn’s bid for control of Dell and participated earlier this year in Icahn’s pledge to pay shareholders a $12 per share special dividend if they vote in his proposed board and reject the company founder’s attempt to take Dell private. The $12 offer would also let shareholders keep a stake in Dell, which Icahn and Southeastern say can become more profitable under different management.
A committee of the Dell board of directors has recommended against Icahn’s proposal, and said the payment of a $12 per share special dividend was unrealistic. The committee said the plan would cause a funding gap of $3.9 bn, and that Icahn would be forced to lower it to as little as $8.50 per share.
Yesterday, the committee recommended in a filing to the SEC that investors accept Michael Dell’s buyout offer, saying that the uncertain outlook of the company means that refusing the founder’s offer would be a risky move.
‘The performance of the PC business in the meantime is central to making that transformation a success,’ the committee says. ‘During the course of the proposed go-private transaction, the performance of Dell and the PC industry as a whole have declined significantly, which magnifies the risks for shareholders. Vote the enclosed white card and receive certain and immediate value for your shares.’
