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Icahn Enterprises Inks Confidentiality Agreement With Dell - Update

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3/11/2013 9:05 AM ET

Icahn Enterprises L.P. (IEP) Monday said that on March 10, it entered into a confidentiality agreement with Dell Inc. (DELL: Quote). The firm said it looks forward to commencing its review of Dell's confidential information.

Dell agreed in early February to be taken private in a $24.4 billion deal by its founder, Chairman and CEO Michael Dell in partnership with private equity firm Silver Lake Partners. The deal is expected to close before the end of the second quarter of Dell's fiscal year 2014.

On March 6, Dell said its special committee of board of directors have unanimously determined that "the sale of the Company would be the best alternative for stockholders."

However, activist investor Carl Icahn urged that Dell pursue a leveraged recapitalization and pay a $9.00 per share dividend if the agreed going-private transaction at $13.65 per share is voted down by shareholders, stating it believed such a transaction was superior to the Going Private Transaction.

In a letter to the Special Committee of the Board, Icahn said the Going Private transaction is not in the best interests of Dell shareholders and substantially undervalues the company.

The special dividend of $9 per share will comprise of $4.26 per share from available cash as proposed in the Going Private Transaction, $1.73 per share from factoring existing commercial and consumer receivables as proposed in the Going Private Transaction and $4.26 in new debt.

Icahn said at that time, "If this Board will not promise to implement our proposal in the event that the Dell shareholders vote down the Going Private Transaction, then we request that the Board announce that it will combine the vote on the Going Private Transaction with an annual meeting to elect a new board of directors. We then intend to run a slate of directors that, if elected, will implement our proposal for a leveraged recapitalization and $9 per share dividend at Dell.''

He added that if his slate of directors is elected, Icahn Enterprises would provide a $2 billion bridge loan and he would personally provide a $3.25 billion bridge loan to Dell, each on commercially reasonable terms, if that bridge financing is necessary. This will assure shareholders of the availability of sufficient funds for the prompt payment of the dividend.

''Our proposal provides Dell shareholders with substantial cash of $9 per share and the ability to continue as owners of Dell, a stock that we expect to be worth approximately $13.81 per share following the dividend,'' the letter had said.

In reply, the Special Committee of the Board of Dell said it is currently conducting a robust 'go-shop' process to determine if there are third parties interested in proposing alternative transactions that could be superior for Dell's public shareholders to the going-private transaction. The Special Committee welcomed Icahn and all other interested parties to participate in the process.

DELL, which closed at $14.16 on Friday, is adding around 1 percent in pre-market activity.

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by RTT Staff Writer

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