Activist investor Icahn raises $5.2 billion to fund rival bid for Dell

Activist investor Carl Icahn has successfully raised $5.2 billion to finance an alternative takeover bid to founder Michael Dell's proposed plan. 

Icahn, who believes that company founder Michael Dell's takeover bid undervalues the company, has proposed that the PC maker conducts a "self tender", in which a company offers to buy its own shares. This technique is often used in a defense against a hostile bid. 

Last month, a special committee of Dell directors rejected Icahn's proposal. "Mr. Icahn’s concept is not, in its present state, a transaction that the Special Committee could endorse and execute," it said in a statement. It recommended the offer led by Michael Dell instead. 

"There is neither financing, nor any commitment from any party to participate, nor any remedy for the company and its shareholders if the transaction is not consummated."

In a letter to Dell's shareholders, Icahn's company announced that it had in fact raised $5.2 billion to finance the deal. 

"With the $5.2 billion in committed debt financing, $7.5 billion from cash on the Dell balance sheet and $2.9 billion to be derived from the sale of receivables, Dell will have the aggregate $15.6 billion necessary to conduct our proposed self tender by Dell."

In its letter, Icahn Enterprises argued that Dell is not in as bad shape as everybody believes. "Based on statements by Dell's management, we believe that Dell's recent aggressive PC pricing discounts are designed to buy meaningful market share while sacrificing near-term margins – a strategy that we believe will benefit future owners," it said. 

It also argued that Michael Dell's offer would enrich him and private equity backer Silver Lake, at the expense of shareholders.

"We believe that it would be a sad outcome for stockholders and would, to say the least, reflect terribly on all who are involved in this process if, after purchasing shares at what we perceive to be a substantially undervalued price of $13.65 per share, Michael Dell andSilver Lake earned substantial returns on their investment while other stockholders are forced to sell."

"We therefore ask the Board to find our proposal to be a 'Superior Proposal' or at the very least to change its recommendation regarding the Michael Dell / Silver Lake transaction."

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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