* Committee tells Michael Dell he should raise offer-source
* Concerns grow ISS won't back Michael Dell
* Icahn commits $3.4 bln in financing for his proposal
* Banks other than Jefferies balk at Icahn financing
By Soyoung Kim, Michelle Sierra and Leela Parker
NEW YORK, July 2 Michael Dell has been advised
to raise his $24.4 billion offer for Dell Inc, coming
under further pressure as billionaire investor Carl Icahn
revealed he had committed more than $3 billion to back an
The PC maker's special committee told Dell's founder and
chief executive a few days ago that he should raise his offer if
he wants it to succeed, a person familiar with the matter said
The special committee, which was formed to independently
assess what the best option for Dell shareholders is, came to
that conclusion based on its meetings with investors as well as
concerns over a key upcoming recommendation by investment
advisory firm ISS, the person said.
ISS is expected to publish its view on whether Michael
Dell's offer, which is backed by equity financing from buyout
firm Silver Lake, is in the interest of Dell's shareholders as
early as next week. A July 18 shareholder vote on Dell's
take-private plan will follow.
Despite being advised by the special committee that he
should raise his offer to see the transaction through, Michael
Dell was non-committal, the person added, confirming an earlier
report by Bloomberg News.
Dell Inc and Silver Lake declined to comment.
The special committee's move came as Icahn and his
affiliates disclosed on Tuesday they had provided $3.42 billion,
or 66 percent, of the debt financing to back his bid for Dell.
Investment bank Jefferies & Co provided $1.6 billion, or 30
percent of the overall $5.2 billion in committed financing with
the remainder of about $179 million coming from 14 institutional
funds, including pension funds and insurance companies,
according to a U.S. Securities and Exchange Commission filing.
"The fact that he could not get lending from other banks
suggests they are not too friendly to this," said Steven Kaplan,
a University of Chicago finance professor. "However, one must
note that a few banks are locked up with the Silver Lake offer."
"On the positive side, Icahn is putting a lot of money where
his mouth is," Kaplan added.
Other market participants evaluating the transaction said
Icahn's move could indicate he may never have aimed to broadly
distribute the deal in the first place.
Calls to Carl Icahn, who runs Icahn Enterprises LP,
were not immediately returned.
Icahn and Southeastern Asset Management are preparing an
offer that would see shareholders tender 1.1 billion shares at
$14 apiece, rivalling Michael Dell's and Silver Lake's $24.4
billion buyout offer of $13.65 a share.
The billionaire investor has said Michael Dell's offer
substantially undervalues the company. Dell's special board
committee had recommended Michael Dell's offer to shareholders.
While the financing commitment marks a crucial step forward
for Icahn's bid for Dell, it is contingent on a dozen board
appointments, according to the SEC filing.
Unless all 12 of the nominees proposed by Icahn and
Southeastern on May 13 are elected to Dell's board, the
financing is unlikely to take place.
Icahn's proposal will also be put to shareholders only if
the offer by Michael Dell and Silver Lake is not accepted by
shareholders when they meet on July 18.
'GAME OF CHICKEN'
All eyes are now on ISS. If it moves against Michael Dell's
offer, he will be under even more pressure to raise it.
"It's a game of chicken," a shareholder said. "Icahn's going
for the bump."
Speculation about a possible bump in the offer price began
on Tuesday with a CNBC report that cited sources claiming that
Michael Dell's camp was not feeling confident that ISS will
recommend his offer. An ISS spokeswoman, however, said that ISS
was still working on its analysis and never signals its
recommendation in advance.
Another person familiar with the matter reiterated on
Tuesday that neither Michael Dell nor Silver Lake have made any
decision on whether to increase their offer.
All sources spoke on condition of anonymity because the
matter is confidential.
The $5.2 billion financing deal put together by Icahn was
shown to a mix of U.S. and foreign banks, asset managers, hedge
funds and collateralized loan obligation (CLO) managers.
Icahn's proposed tender offer will be financed with $7.5
billion of cash on the balance sheet, the $5.2 billion credit
facility and $2.9 billion from the sale of receivables.
If Icahn's proposal prevails, the loans would launch to a
more broad range of institutional investors before September 30,
or the three-month commitment period of the $5.2 billion loans,
according to sources.