Wall Street Beat: Icahn battle with Dell over buyout going down to the wire

Shareholder vote is set for July 18

By , IDG News Service |  Hardware

With a shareholder vote scheduled for July 18, the battle over Dell's US$24.4 billion plan to go private intensified Friday as investor Carl Icahn and his affiliates issued an enhanced offer for the company.

Icahn and his partner, Southeastern Asset Management, issued a letter to Dell shareholders offering a warrant to buy a share in the company at US$20 over the next seven years for every four shares that they sell now. Icahn's plan calls for part of the company to continue to be publicly traded.

The new offer is in addition to the previous proposal to buy shares at $14 each. Making the calculation that shares will rise over $20 once the suggested proposal and new management is in place, Icahn said in the letter that the entire deal is potentially worth $15.50 to $18 a share for current shareholders.

In the letter, Icahn said that he and Southeastern are "completely committed to bringing in management that we expect to be far superior to Michael Dell who we believe has had an abysmal record during the last three years. We believe there would be several excellent candidates for this position who would be very interested in running this company once a clear mandate has been established."

Michael Dell and his affiliates, Silver Lake Partners, are offering $13.65 in cash per share. Dell is betting that as a private company, free from the pressure of Wall Street scrutiny, it will have more room to execute its strategy to push into high-margin products and services and move away from the floundering PC market.

For the buyout plan to go through, it needs to be approved by 50 percent of shareholders not including Michael Dell. This amounts to investors holding a total of 42 percent of the company.

With the shareholder vote looming, the battle over Dell's future has ramped up recently.

Earlier this week, Icahn pressed shareholders to exercise appraisal rights on the company's value. The appraisal would require a Delaware state judge to issue an opinion on the company's worth. It could also derail the deal.

Dell responded to Icahn's suggestion for the appraisal with a scathing statement of its own.

"Pursuing appraisal involves substantial risks and costs," Dell said. "If a sufficiently large number of shareholders seek appraisal and thus do not vote in favor of the acquisition (which is required to pursue appraisal rights), the merger agreement will be terminated, the merger will not occur, stockholders will not have the opportunity to receive the $13.65 per share cash merger consideration, there will be no appraisal rights, and stockholders will continue to bear the risks of holding their Dell shares. "

In addition, Dell pointed out, there is no assurance that a judge would value the company greater than what Dell is offering.

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