* Icahn proposal "superior", some shareholders say
* Offers choice, stirs discussion, they say
* Some hope Michael Dell, Silver Lake will counter-offer
By Sam Forgione and Ross Kerber
NEW YORK/BOSTON, May 10 Carl Icahn and
Southeastern Asset Management Inc have mounted an aggressive
challenge to Michael Dell's controversial $24.4 billion offer to
take Dell Inc private, offering $21 billion in cash to
shareholders while vying to wrest control of the company from
Michael Dell, major shareholders such as Southeastern and
billionaire activist investor Icahn are waging a battle over the
future of the world's third largest personal computer maker,
once a tech-industry high flyer, but now struggling to evolve as
people embrace smartphones and tablet computers.
Michael Dell and private equity firm Silver Lake want to
take the company private for $13.65 per share, making it the
largest buyout since the 2008 financial crisis. But many
shareholders, including Southeastern and T. Rowe Price, complain
that offer severely undervalues the company.
Instead, Icahn and Southeastern, two of Dell's biggest
shareholders, proposed a deal that gives shareholders $12 of
cash for every share they own, as well as allow them to keep
their stock. Given that they retain their stake in the company
and that the rival offer is for $13.65 a share, every stock
owned takes on a value of $1.65, Icahn and Southeastern argue.
At $12 apiece, the cash portion of Icahn's and Southeastern'
s offer will come to $21 billion.
Should Dell's board rebuff them and put the go-private offer
to a shareholder vote, the pair will nominate a slate of 12
directors to challenge the current board. In an interview with
CNBC on Friday, the activist investor said Michael Dell will no
longer run the company should his slate of candidates be
The initial reaction from shareholders was favorable, though
some investors hoped the latest offer would prompt Michael Dell
to offer a counter. David Moon, Chairman of Moon Capital
Management in Knoxville, Tennessee, said his firm sold its Dell
shares weeks ago and warned that failure to secure any sort of
deal might send Dell's shares back to $10 a share, before
Michael Dell's takeover offer.
Mario Gabelli, chief executive of Gamco Investors Inc, said
via e-mail he would vote in favor of the latest proposal. On
Twitter, he wrote it was a "good alternative" to a leveraged
buy-out. Gabelli investment funds own about 5.2 million Dell
shares, latest filings show.
"It's improvement. It gives people a choice. The other
(proposal) comes across like a ramrod," said Donald Yacktman,
founder and CEO of Yacktman Asset Management which holds 14.8
million shares, according to Thomson Reuters data. "Whichever
way things evolve, what this is doing is forcing better capital
allocation than we have seen in the last five years."
On Friday, Icahn again suggested Michael Dell would be the
biggest beneficiary of his own proposed buyout, which would
exclude current shareholders from participating in the fruits of
his restructuring effort.
Icahn's offer "gives us the opportunity to continue our
participation in Dell's operating business and thus we believe
it to be superior," said Tim Piechowski, associate portfolio
manager, Alpine Capital Research, St Louis, Missouri, which
owned 2.5 million shares as of May 10.
Dell shares were up 0.7 percent at $13.42 in late trade.
Icahn argued in a letter sent to Dell's board and made
public in a filing on Friday that Dell operates a large
enterprise-focused computing business in addition to its ailing
PC division, with strong ties Microsoft Corp and Intel
Corp. Without specifying details, he also said cost
savings could be had from merging assembly plants across the
world, while there remained opportunities to spin off non-core
That echoed Michael Dell's own strategic vision for a
company he hopes to transform from a purveyor of low-margin PCs
into a global provider of high-margin services for enterprises.
As for Southeastern, past filings show the fund management
firm run by Mason Hawkins bought into Dell's shares at about
$16.88, meaning a huge loss were they to accept a buyout.
Icahn told Reuters on Friday he will personally contribute a
couple of billion dollars to finance a $5.2 billion bridge loan
needed to effect his deal. He added that he had already reached
out to several investment bankers. Later, he told CNBC in a TV
interview that one of those investment banks included Jefferies,
which would contribute $1.6 billion to the loan.
Jefferies & Co declined to comment.
The Icahn and Southeastern challenge comes after Blackstone
LP ended its pursuit of Dell in April, and pulled out a
month after it teamed up with Icahn to challenge the
It was "insulting to shareholders' intelligence for the
board to tell them that this board only has the best interests
of shareholders at heart," Icahn and Southeastern said in the
letter. "We are often cynical about corporate boards, but this
Board has brought that cynicism to new heights."
Dell said in a statement on Friday that its special
committee is reviewing the Southeastern Asset materials and will
provide comment in "due course." A representative for Silver
Lake declined to comment.
"I don't think Icahn and Southeastern have enough sway over
the shareholders," Raymond James analyst Brian Alexander said.
"As Dell has a lot of cash, (the latest deal) is basically like
a leveraged private equity deal, without the company going
Both Icahn and Southeastern said they would take shares
rather than cash. They would finance the proposal from existing
cash and about $5.2 billion in new debt.
Icahn and Southeastern together hold about 13 percent of
Dell stock. The billionaire investor previously proposed paying
$15 per share for 58 percent of Dell.
"As a shareholder, what I'm most pleased about is that the
pot continues to be stirred," said Robert Willis, president and
CEO of Willis Investment Counsel in Gainesville, Georgia, which
owns about 350,000 shares of Dell. "I like the fact that those
who oppose this aren't going to lie down."