Dell To Icahn: You're $3.9B Short

The alternative proposal for Dell by Carl Icahn and Southeastern Asset Management just won't cut it financially, according to a report filed Wednesday by the special committee assigned to investigate deals to sell Dell.

According to a 39-slide presentation filed with the Securities and Exchange Commission Wednesday, Icahn's proposal would lead to a $3.9 billion funding shortfall. The leveraged recapitalization calls for investors to receive $13.65 per share, or $12 per share and the ability to keep a share of Dell for $1.65.

Even adjusting the offer for incremental liquidity needs, which would leave shareholders with $5.15 shares, the special committee wrote that negative earnings and the business trajectory make multiple expansion less likely.

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Icahn and Southeastern also suggested nominees to replace Dell's current board of directors if the current board did not accept his deal.

But Dell's special committee previously urged shareholders to accept the company's current proposed $24.4 billion offer of $13.65 per share from Silver Lake Partners, Michael Dell and other financing partners.

In addition to the $3.9 billion shortfall, the special committee argues that the Icahn-backed leveraged recapitalization could cause Dell's perception to fall with employees, vendors and customers because it would hold a "significantly weaker profile than key enterprise peers" and that it would be in a weak financial position to complete its strategy to become a more enterprise-focused company (the committee said revenue would remain about two-thirds coming from PCs).

One of Dell's chief rivals, Hewlett-Packard CEO Meg Whitman, recently told CRN that Dell would face a lot of debt and just be trading "one master for another" with a leveraged buyout.