Billionaire Investor Threatens to Derail Dell Buyout

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Last month, Dell, Inc. announced a $24.4-billion buyout deal between founder Michael Dell, Silver Lake Partners and Microsoft that would take the company private.

Billionaire shareholder Carl Icahn wrote a public letter to Dell last Thursday opposing the buyout deal of $13.65 per share. He suggested instead that Dell pay a special dividend of $9 in an effort to recapitalize its share price at $22.81 per share.

“We believe, as apparently does Michael Dell and his partner Silver Lake, that the future of Dell is bright,” Icahn wrote, according to The New York Times. “We see no reason that the future value of Dell should not accrue to all the existing Dell shareholders—not just Michael Dell.”

Today, Dell announced that Icahn had signed a confidentiality agreement with the company so that he could look over the company’s private financial information. The confidentiality agreement does not keep Icahn from adding to his stake in Dell, which some estimate to be at about 6 percent of shares.

The Dell committee had previously considered a special dividend but had decided that Michael Dell and Silver Lake’s offer to take the tech company private provided the superior value for shareholders. Some on the committee hope Icahn will make a $15-per-share bid for more of the company’s shares.

Dell has suffered as the PC market has declined in recent years; its Q4 2012 PC shipments dropped by 5 percent from the previous year. The company has made some unsuccessful attempts to transition into business services.

By going private, Dell would no longer be under pressure to respond to shareholders. Also, the company could eliminate of some of its ailing PC business and invest some of its large cash stockpile into business services.

Dell still sells a lot of computers though. The firm brought in revenue of $62 billion last year, despite its sluggish stock performance.

According to The Wall Street Journal, Icahn threatened Dell’s board with “years of litigation” if they didn’t choose the dividend option he proposed. After Icahn signed the agreement, the Dell committee reiterated its commitment to finding the best deal for Dell shareholders.

“Our goal is to determine if there are alternative transactions that could be superior for Dell’s public shareholders to the going-private transaction and to secure the best result for them—whether that is the announced transaction or an alternative,” the committee said in a statement.




Edited by Braden Becker
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Contributing Writer

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