A Dell committee, made up of four board members charged with deciding whether going private is the right move, has responded to Dell investor Carl Icahn, who says it isn't.
In a February 5 letter, Icahn said that he and others do not "believe that [the Going Private Transaction] is in the best interests of Dell's shareholders and substantially undervalues the company." Instead of going private, Icahn would like to see Dell issue a special dividend of $9 per share. That should result, he said, in a stock price increase to $13.81, which, added to the $9-per-share dividend, would give shareholders "a total value of $22.81, representing a 67 percent premium to the $13.65 per share proposed in the Going Private Transaction."
Icahn has long been a thorn in the side of troubled companies. He perhaps most famously played an integral role five years ago in Yahoo rejecting Microsoft's bid to acquire the Internet giant. Icahn also made significant inroads at Netflix last year before that company initiated a "poison pill" provision, making it financially untenable for him to acquire more shares and wrest control of its operation.
As he has in previous situations, Icahn provided an ultimatum to Dell. He said that if the company doesn't agree to the dividend, which would be initiated only after the Going Private Transaction is voted down, he would propose "a slate of directors" to replace Dell's current board. He also hinted that the company and board directors could face "years of litigation" if they go through with the deal.
The specially created Dell committee responded to Icahn today, saying that it's "currently conducting a robust 'go-shop' process" to find third-parties that might be able to offer a better deal to Dell's shareholders. The committee also welcomed "Carl Icahn and all other interested parties to participate in that process." The "go-shop" process is expected to run through March 22, the committee said, and could lead to negotiations with third-parties running longer.
"Our goal is to secure the best result for Dell's public shareholders -- whether that is the announced transaction or an alternative," the committee said in its response today.
According to Bloomberg, Dell's "go-shop" process might have been fruitful. Citing people who claim to have knowledge of Dell's discussions, Bloomberg is reporting that Hewlett-Packard and Lenovo, its two top competitors in the PC business, have expressed interest in the computer maker.
Dell announced last month that founder and CEO Michael Dell, along with some help from investment firm Silver Lake Partners and Microsoft, would take the company private at $13.65 per share. Soon after, the company was criticized by some shareholders for considering a deal that might have been too low.
Icahn has yet to react to the committee's response. However, in his previous note, he offered Dell a deal: if the company stays public and his slate of directors is elected, his company, Icahn Enterprises, will give Dell a $2 billion bridge loan. He would also personally provide the company with a $3.25 billion bridge loan.
"We believe, as apparently does Michael Dell and his partner Silver Lake, that the future of Dell is bright," Icahn said. "We see no reason that the future value of Dell should not accrue to ALL the existing Dell shareholders -- not just Michael Dell."