Published On: Fri, Jun 21st, 2013

Carl Icahn attacks the Dell takeover struggle, but from a different angle

It now appears that there’s not a tree with branches tall enough in all of the great state of Texas that will allow both Michael Dell and Carl Icahn to climb down from. With the pair now locked in a battle for control at Dell computers, and with a vital shareholders meeting less than a month away, the pair has once again locked antlers.

Michael Dell / Getty

Michael Dell / Getty

Carl Icahn / Getty

Carl Icahn / Getty

 

 

 

 

 

 

 

 

/ By Albert Hecht /

Financial commentators are now convinced that when Michael Dell, in partnership with private-equity firm Silver Lake Management, made a $13.65-a-share deal to take the company back into private hands in earlier this year, that he had no idea what he was bringing on himself.

Not that Dell was not aware that there was a struggle to bring company that he founded into the smart tablet era, and that the desktop computer was slowly winding its way into the annals of history. These are the fact that he was aware of and genuinely, at least most people believe, wanted to change.

However his attempted takeover attracted the attention of activist investor Carl Icahn who, after some initial research, apparently arrived at the conclusion Dell was attempting to privatize the company on the cheap.

Since then Icahn has made every effort to block the deal and force Dell to increase his offer per share to $14.

Icahn, with decades of experience as an activist investor, knows all the tricks how to take profit from the company and yet he is capable of using them all to get what he wants out of Dell. His latest move was to send an open letter to the company’s shareholders, stating that Dell should be convinced by the shareholder block to submit a tender offer to purchase around 1.1 billion shares at $14 apiece.

In his letter Icahn explained this point of view stating “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, as well as providing an opportunity for those who wish to tender at $14 a share to do so.”

Icahn has put his money where his mouth is once again by announcing to his fellow Dell shareholders that he has succeeded in almost doubling his stake in the company, and now holds the second-largest number of shares in the computer giant, behind Dell himself. This disclosure comes after Icahn reportedly picked up to block of 72 million shares from fellow dissident holder Southeastern Asset Management, equivalent to half of their position in the company.

Announcing the decision to sell to Icahn, a spokesperson for Southeastern stated that they had determined that Icahn is in the best position to lead the development of an alternative transaction.

Financial commentators point out that by selling their shares to Icahn, Southeastern are effectively passing the reins to the activist investor just as the takeover race enters the final stretch. When making the announcement, Southeastern insisted that they would be voting against Dell’s offer at next month’s meeting, which also calls for an entire new board of directors to be voted in at Dell all of them picked out by Icahn.

Icahn has explained to his fellow shareholders that he has all of the necessary finances also at his disposal to make his vision for Dell become a reality, with around $18 billion at his disposal made up by $5.2 billion in debt packages, a commitment to receive financing of $1.6 billion from an investment bank, $7.5 billion that Dell are currently sitting on in cash, as well as close to $3 billion Icahn expects to raise from sales of its receivables.

This kind of financial muscle, Icahn insists, would still leave approximately $4.9 billion in cash to finance ongoing Dell operations.

However reports have it that the special committee formed by Dell shareholders to specifically review all offers for the company were unimpressed stating that Mr. Icahn’s offer to take control of the company is not, in its present state, a transaction that the Committee could endorse and execute predicting that Icahn’s well-known concept of financial management” would see Dell become an over-leveraged company, making for an uncomfortable deal for its shareholders.

Icahn’s recent proposal, is now the third that he has made judging from the enthusiastic reception received from the shareholders committee it may well not be his last before the Dell decision day dawns on the 18th July.

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