Billionaire investor Carl Icahn, who is fighting Dell Inc. founder Michael Dell’s plan to take the struggling company private, has entered a confidentiality agreement that would give him access to the computer maker’s financial records.
Michael Dell, who is also Dell’s chief executive officer, is planning a $24.4 billion buyout that would make the Round Rock, Texas, company a privately owned business. But Icahn and other investors say the price of $13.65 per share is too low.
Icahn’s company, Icahn Enterprises, has said it holds a substantial stake in the company.
The deal - which requires approval from a majority of shareholders excluding Dell - has been opposed by shareholders including Southeastern Asset Management Inc. and T. Rowe Price Group Inc.
Icahn wants the company to pay a special dividend of $9 per share, financed with existing cash and new debt, if shareholders reject the buyout offer.
The investor told Dell executives in a recent letter that if they decline to promise this one-time payout, then he wants the company to combine a shareholder vote on the buyout with its annual election of directors.
In that case, Icahn would nominate candidates who would implement the special dividend if they are elected, and Icahn and his company could provide more than $5 billion in loans to ensure prompt payment of the dividend.
Icahn wrote in his letter to Dell last week that the PC-maker’s future is bright and all shareholders should benefit from that, not just Michael Dell. Icahn is known for buying out-of-favor stocks and increasing their value by pressuring or replacing boards of directors, installing new management and other hard knuckle tactics.
Analysts say Icahn’s entry into the debate over the deal makes it less likely that shareholders will accept Dell’s current buyout offer.
Dell appointed a special committee of directors last August after he notified the company that he was exploring a buyout bid in partnership with other investors. Michael Dell has agreed to contribute 273 million shares of the company stock that he controls and $750 million in cash to help finance the buyout, which relies primarily on loans from PC software-maker Microsoft Corp. and an assortment of banks.
Dell’s special committee has said it already considered a special dividend during a “rigorous” five-month review that culminated with the buyout plan. It said last week that it is conducting a search for better alternatives to the proposed buyout and that Icahn and others are welcome to participate.
Dell shares climbed 21 cents to close Monday at $14.37 as broader trading indexes rose slightly. Shares of Icahn Enterprises rose 40 cents to $61.20.
Icahn’s signing of a confidentiality agreement shows his intention to stay involved in the transaction until he’s guaranteed a profit, said Anthony Michael Sabino, a professor at John’s University’s Peter J. Tobin College of Business. He may attempt his own takeover or support a third-party bidder.
“This opens up a host of possibilities,” Sabino said. “Dell is fully in play. This is a classic auction.”
The so-called go-shop period for the company to seek higher bids runs through March 22, and Dell Inc. said last week that it welcomes Icahn and other parties to participate in that process.
Information for this article was contributed by Tom Murphy of The Associated Press and by Lisa Rapaport of Bloomberg News.
Business, Pages 23 on 03/12/2013