Billionaire investor Carl Icahn has confirmed that he is a "substantial holder" of Dell shares and told the company's board of directors to anticipate "years of litigation" should it continue with its proposed leveraged buyout of $13.65 per share.
In a letter to the board, Icahn, chairman of Icahn Enterprises, proposed that Dell immediately declare and pay a $9 per share special dividend from available cash, existing commercial and consumer receivables and new debt.
"We believe that such a transaction is superior to the Going Private Transaction because we value the proforma 'stub' at $13.81 per share using a discounted cash flow valuation methodology based on a consensus of analyst forecasts. The 'stub' value of $13.81 combined with our proposed $9 special dividend gives Dell shareholders a total value of $22.81 per share, representing a 67 percent premium to the $13.65 per share price proposed in the Going Private Transaction. We have spent a great deal of time and effort in determining the $22.81 per share value and would be pleased to meet with you to share our analysis and to understand why you disagree, if you do," Icahn wrote in the letter to Dell's board.
Icahn also threatened a proxy fight and urged the board to adopt his proposal if the buyout is voted down by a majority of Dell shareholders.
Reports first surfaced Wednesday that Icahn had purchased up to 6 percent of Dell's stock, about 100 million shares, and that he opposed the proposed buyout. Dell's stock closed Wednesday at $14.32, up 25 cents, or 1.8 percent. It marked the highest close for Dell's stock since May 22, 2012.
Icahn is expected to join other large investors, including Southeastern Asset Management, in opposition to the deal, worth about $24.4 billion with Silver Lake Partners and other financing partners. Dell has until March 22 to entertain other offers during the mandatory "go-shop" period.
Meanwhile, Bloomberg reported Wednesday that Lenovo and Hewlett-Packard, as well as global investment firm Blackstone Group, have all taken advantage of the go-shop period to peek into Dell's financial books.
If Dell doesn't accept Icahn's proposal, he wants to elect a new board of directors, he wrote.
"We then intend to run a slate of directors that, if elected, will implement our proposal for a leveraged recapitalization and $9 per share dividend at Dell," Icahn wrote. "In that way shareholders will have a real choice between the Going Private Transaction and our proposal."
Icahn Enterprises would pledge a $2 billion bridge loan and Icahn himself would provide a $3.25 billion bridge loan to Dell, each "on commercially reasonable terms," if bridge financing becomes necessary, he wrote.
"Your fiduciary duties as directors require you to call the annual meeting as contemplated above in order to provide shareholders with a true alternative to the Going Private Transaction," Icahn wrote.
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