One month ahead of a Dell Inc. shareholder vote on the company's
proposed buyout, there are few signs that activist investor Carl Icahn has put
together all the pieces he needs to offer an alternative proposal for investors.
Icahn, who has the backing of Memphis-based Southeastern Asset Management Inc., a big and disgruntled Dell shareholder, has suggested two possible plans for the company, but has not submitted a formal proposal.
Late last week, David Faber of CNBC reported that Icahn is "increasingly likely to drop his bid" for Dell.
Icahn wrote a letter to Dell Inc.'s board of directors on May 10 suggesting that the company use its own cash and additional borrowing to pay stockholders $12 a share in a special dividend that would be paid either in cash or in Dell stock valued at $1.65 a share.
Dell's board got no response from Icahn when it asked him for more details so that it could evaluate his plan.
In early June, the special committee to Dell's Board issued a formal criticism of Icahn's plan and formally endorsed the $24.4 billion buyout bid from company founder and CEO Michael Dell and Silver Lake Partners, a California investment company. That deal is valued at $13.65 a share.
The Dell special committee said it found flaws in Icahn's proposal that indicated it has a $3.9 billion "funding gap," in the plan which would not enable a $12 per share dividend to be paid.
CNBC's Faber wrote that "sources close to the situation tell me the chances Icahn will back out of his recap have grown considerably."
Icahn could not be reached for comment Monday.
Even if Icahn failed to submit a formal proposal for the Round Rock company, he could continue with his opposition to the Michel Dell/Silver Lake offer.
Dell Inc. has hired a proxy solicitation company to seek votes in favor of the Michael Dell buyout, while Icahn and Southeastern Asset have hired a separate proxy firm to seek votes against the proposal.
Icahn and Southeastern Asset together own more 12.7 percent of Dell's stock. Michael Dell and a group of senior Dell executives together own about 16 percent of the company's stock, but their shares will not be counted in the buyout vote.
Technology analyst Patrick Moorhead, with Moor Insights & Strategy, said he has never considered Icahn to be a serious bidder for Dell Inc. with a long-term plan for the company.
Dell Inc., which is coping with a downturn in the global personal computer business, requires a long-term business overhaul as it shifts more of its business toward providing advanced hardware, software and services to enterprise customers.
"I don't think Carl Icahn has any intention of making a long-term investment in Dell," Moorhead said. "He wants to make money on the spread and get out."
Because the deterioration of the PC industry indicates there is no "quick fix" for Dell, it makes sense that Icahn would have a difficult time getting lenders to support his deal."
Voting down the Michael Dell bid for the company without a legitimate alternative is risky for shareholders, Moorhead said, because the company's stock probably will drop in the absence of another bid.
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