offer a better price to investors.
Icahn was one of two potential investors for the company to surface. The other during that period was the Blackstone Group of New York, which negotiated with Dell Inc. officials for several weeks before bowing out of the process in late April. Blackstone said it was spooked by rapidly falling shipments of personal computers early this year.
That left Icahn, who has proposed three potential investment offers for the company since March. The latest Icahn proposal calls for offering $14 a share for 72 percent of the company's stock. The money for the proposed deal would come from $5.2 billion in borrowing with the remaining funds coming from the company's cash holdings and from the sale of its "receivables," which are debts owed by customers. Under the Icahn plan, part of the company would remain publicly held and traded.
Icahn has publicly said that he also wants to transform Dell Inc., but he has spoken about potential cost savings and assets, such as Dell Inc.'s financial arm, that could be sold to raise funds. Mostly he has criticized Michael Dell and the company's board for overplaying the challenge the company faces and using "scare tactics" to persuade investors to support the buyout. Dell's special committee has noted that two-thirds of the company is related to sales of personal computers and that the company's cash flow from operations is deteriorating as sales of PCs weaken and competitors drive down prices. The committee has also suggested there is a "substantial downside risk" if the buyout is rejected, because the company's stock could drop substantially without the near-term prospect of a purchase.
"Why have they done this?" Icahn wrote in a recent open letter to investors. "In my opinion, they wish to frighten stockholders into selling Dell to Michael Dell and Silver Lake at what I believe is a bargain price."
While Icahn maintains the buyout offer doesn't reflect Dell Inc.'s true business value, the company notes that the stock market has devalued Dell Inc. and other PC-related companies in part because of slowing global PC sales. As recently as last November, Dell's stock was trading below $10 a share. The stock price started rising in December only after a Goldman Sachs report said the company might be a buyout candidate. Compared with that depressed stock price, the Michael Dell/Silver Lake offer price is more than 41 percent higher.
However, Icahn said his research into Dell Inc. and the PC business convinces him that there is substantial value in the more than two dozen young tech companies Dell has bought since 2008. Dell has spent more than $13 billion on promising technology acquisitions over the past five and a half years, and it has been pleased with their success. But the company says much more work needs to be done for it to become a major, broad-based information technology supplier.
"I believe that there are many opportunities to enhance the value of Dell through cost savings," Icahn wrote. "I believe that the board could have and should have given all shareholders the opportunity to benefit from these developments and not just their 'favorite son.'"
Analysts who follow Dell Inc. and the rest of the computer industry have, to this point, expressed skepticism about Icahn's intentions and his reported plans for the company.
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