March 11 Dell Inc has agreed to give
Carl Icahn a closer look at its books, less than a week after
the activist investor joined a growing chorus of opposition to
founder Michael Dell's plan to take the world's No. 3 personal
computer maker private.
Dell shares were up 1.5 percent at $14.37 in afternoon
trading, well above the take-private offer price of $13.65,
after Icahn said on Monday his Icahn Enterprises LP had
reached a confidentiality agreement with the company and looked
forward to "its review of Dell's confidential information."
Investors, including No. 2 and No. 3 shareholders
Southeastern Asset Management and T. Rowe Price, have publicly
voiced their objections to a $24.4 billion buyout led by founder
Dell and private equity outfit Silver Lake.
The founder is trying to complete his company's transition
from a low-margin PC maker into a provider of computing
services, a makeover that has taken on new urgency as the PC
market shrinks and that analysts say might best be carried out
away from public shareholder pressure and scrutiny.
But Icahn demanded last week that Dell pay out $15.7 billion
in special dividends instead of going private, arguing the
buyout short-changed shareholders by undervaluing the company
and benefited mainly Michael Dell.
CNBC reported the billionaire investor, who has a reputation
for aggressively demanding changes at companies he targets, had
built up a stake of about 6 percent in the PC maker.
A source with knowledge of the situation said Icahn's and
Dell's confidentiality agreement does not have a contractual
"standstill" obligation - meaning he is not obligated to stop
trading stock in the company. But the activist investor would
not be able to trade the stock while he is privy to non-public
information in any case, the source added.
Dell is now in a "go-shop" period that ends on March 22,
during which its advisors are actively soliciting bids superior
to Silver Lake's and Michael Dell's proposed deal.
Cross Research analyst Shannon Cross said the move was just
another step in Dell's commitment to examine alternative offers.
But she said it "probably indicates Carl Icahn is serious about
"The Special Committee welcomes Carl Icahn and all other
interested parties to participate in the 'go-shop' process," the
committee said in a statement on Monday. "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."
Icahn, whose arrival on the scene typically puts companies
on guard, wants the PC maker to pay $9 a share in dividends
immediately from its own cash and from raising new debt.
He argued that, combined with a "stub" value of $13.81 per
share his firm calculated based on discounted cash flow, his
proposal would deliver a total value of $22.81 per share.
That would be a 67 percent premium to the $13.65 buyout
price put forward by Michael Dell.