Dell board warns Icahn bid could leave the company short of cash

Dell's board has told activist investor Carl Icahn it needs more information in order to evaluate his latest bid

A plan proposed by Carl Icahn and Southeastern Asset Management last week as an alternative to Michael Dell's proposal to take his namesake company private would leave it short of cash, Dell's board warned the bidders.

It wants to know more about the proposal -- including who the bidders plan to put in charge of the company -- before it can formally evaluate it, the board told the investors in a letter made public Monday.

The company is already considering a proposal from founder Michael Dell and private equity firm Silver Lake to take the company private, and under the terms of that deal cannot formally consider any new bid unless it appears to be a superior proposal.

It's not clear whether Icahn's plan is intended as an actual acquisition proposal that the Board could evaluate and potentially endorse or accept, or as an alternative it could consider if the pending sale to Silver Lake and Michael Dell fell through, the Special Committee of the Board of Directors wrote in the letter to Icahn and Southeastern.

The committee asked Icahn for a draft of the definitive agreement concerning the proposed transaction, and for details of how Icahn and Southeastern planned to finance it. It also asked who they planned to put in charge of the company, and what role the senior management team would play in arranging the financing.

The proposal made last Thursday will leave Dell short of working capital and potentially without the means to pay off $1.7 billion in debt maturing within 12 months of the deal's closing, the committee wrote. In addition, the proposal does not appear to consider additional borrowing needed to make up for use of the company's cash in the transaction, nor that the proposed sale of accounts receivable will reduce future cash flows, it wrote.

The committee also questioned Icahn's assertion that holders of at least 20 percent of Dell's shares will choose to receive additional shares rather than the $12 per share windfall Icahn proposed. Icahn, Southeastern and affiliated entities appear to control around 12 percent of the company's shares, the committee wrote. It asked for either proof of the commitment of the other 8 percent, or for Icahn's plans to finance the additional windfall payments.

Shareholders tempted to accept additional stock under Icahn's plan -- if it becomes a firm proposal -- are in the dark about whether the new stock would be taxable. The committee asked Icahn to provide his analysis of the tax question.

Peter Sayer covers open source software, European intellectual property legislation and general technology breaking news for IDG News Service. Send comments and news tips to Peter at peter_sayer@idg.com.

Join the newsletter!

Or
Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags Mergers and acquisitionsbusiness issuesDell

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Peter Sayer

IDG News Service
Show Comments

Essentials

Mobile

Sansai 6-Outlet Power Board + 4-Port USB Charging Station

Learn more >

Exec

Budget

Back To Business Guide

Click for more ›

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Andrew Teoh

Brother MFC-L9570CDW Multifunction Printer

Touch screen visibility and operation was great and easy to navigate. Each menu and sub-menu was in an understandable order and category

Louise Coady

Brother MFC-L9570CDW Multifunction Printer

The printer was convenient, produced clear and vibrant images and was very easy to use

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Walid Mikhael

Brother QL-820NWB Professional Label Printer

It’s easy to set up, it’s compact and quiet when printing and to top if off, the print quality is excellent. This is hands down the best printer I’ve used for printing labels.

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?