Icahn offer has US$2.9B funding shortfall, Dell says
Dell’s shares close virtually unchanged
Dell Inc. said the tender offer proposed by billionaire investor Carl Icahn as an alternative to a planned buyout by chief executive Michael dell has a uS$2.9-billion funding shortfall, making it less valuable.
After accounting for nearterm debt obligations and minimum cash needs to run the company, Mr. Icahn’s $14-a-share offer would be worth about uS$8.15 per share, a special committee for
What they are saying is ludicrous and a normal scare tactic
dell’s board said in a regulatory filing Monday.
The committee is pointing out shortcomings in Mr. Icahn’s offer ahead of a shareholder vote set for next month, seeking to attract backing for the CeO’s plan to take the third-largest personal computer maker private with Silver Lake Management LLC. Mr. Icahn and partner Southeastern Asset Management Inc. last week urged the PC maker to make a tender offer for about 1.1 billion shares, his third push to derail the $13.65-a-share buyout proposed by the CeO.
“Michael has repeated the liquidity shortfall — the debt will cripple the company claim — so many times that no imaginable variant of it will influence the vote,” said erik gordon, a professor of business and law at the university of Michigan in Ann Arbor. “Institutional invest- ors who hold large numbers of votes are less interested in another round of it than they are in the price per share and the solidity of Icahn’s financing.”
while Mr. Icahn’s proposal projects uS$15.6-billion in liquidity, the company will actually have $12.7 billion, according to dell’s board committee.
The difference includes uS$1.4-billion in debt maturing through April 2014 and uS$1.5-billion in cash needed to run the company.
existing cash doesn’t need to be used to pay down debt, Mr. Icahn said in a telephone interview Monday.
“what they are saying is ludicrous and is a normal scare tactic,” Mr. Icahn said.
Mr. Icahn has said he’s working to line up uS$5.2billion in debt for the proposed tender offer, and Jefferies group LLC is willing to make uS$1.6-billion available, according to a person familiar with the plan who asked not to be identified because the information isn’t public.
To calculate the value of Mr. Icahn’s proposal, dell’s board committee assumed that 87.5% of holders would tender their shares, according to the filing. Mr. Icahn and Southeastern combined have a stake of about 13%, according to data compiled by Bloomberg, while the CeO holds more than 15% of the company he founded.
The Silver Lake-dell bid is the only binding and fully financed offer the company received in the sale process started in August, and no one else has been able to reach or beat that price, Michael dell said in a filing last week.
A vote on the deal, which requires approval from a majority of holders excluding Michael dell, is set for July 18.
dell shares closed virtually unchanged at uS$13.35 Monday in New york. They had climbed 32% this year through June 21, compared with a 12% gain for the Standard & Poor’s 500 Index.