Beleaguered personal computer maker Dell, Inc. (DELL), which is in a deal to be taken private by its founder, Chairman and CEO Michael Dell and private equity firm Silver Lake Partners, revealed in a regulatory filing on Friday that Icahn Enterprises L.P. (IEP) and Southeastern Asset Management, Inc. have decided to vote against the 'going private' deal.
Southeastern and Icahn are currently also floating an alternative deal that will provide shareholders an option to receive either a distribution of $12 per share in cash or $12 per share in stock valued at $1.65 a share, allowing them to hold on to existing stock.
Both Southeastern and Icahn would elect to take additional shares rather than cash. They would finance the offer with existing cash at dell and about $5.2 billion in new debt.
In a filing with the Securities and Exchange Commission, Dell revealed a May 9 letter from to its board from shareholders Southeastern and billionaire investor Carl Icahn's Icahn Enterprises, which says both of them, together owning about 13 percent of Dell, have decided to vote against the deal as it is not in the best interests of Dell shareholders and substantially undervalues the company.
Round Rock, Texas-based Dell had agreed in early February to be taken private in a $24.4 billion deal by 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.
"We urge the Board to put our proposal before Dell's shareholders, preferably by recognizing it as a Superior Proposal and proceeding with our proposal in lieu of the Going Private Transaction, or alternatively by calling an annual meeting simultaneously with the vote of shareholders on the Going Private Transaction," Southeastern and Icahn wrote in the letter.
Two of the largest outside shareholders of Dell, Southeastern Asset Management and T. Rowe Price (TROW) had already made public their decision to vote against the leveraged buyout since then.
The strength of Michael Dell's offer is his participation and his decision to roll over his 15.6 percent stake to help finance the deal.
The deal provided for a robust 45-day go-shop process, and Dell incentivized its financial adviser Evercore Partners for roping in superior proposals during the period.
Just before the period concluded, Dell confirmed on March 25 the receipt of two rival bids from a consortium led by private-equity giant Blackstone Group, L.P. (BX) as well as a group led by billionaire investor Carl Icahn's Icahn Enterprises (IEP).
Icahn offered to acquire 58.1 percent of Dell at $15 per share in cash that provided shareholders who wish to participate in the ongoing upside of the company the opportunity to remain invested, with Dell continuing to be publicly traded on the Nasdaq.
However, the Blackstone-led group backed out of the deal on April 16, leaving the Icahn-led group to fight for a deal. Blackstone also offered a somewhat similar deal, offering cash and stock in excess of $14.25 per share for a part of Dell in a leveraged recapitalization transaction.
Southeastern Asset Management, beneficial owner of 8.4 percent of Dell, had then viewed both the rival bids as as superior primarily because each offers shareholders the opportunity to remain owners of Dell while also offering a higher cash price to owners who choose to exit their investment.
Southeastern and Icahn have now requested Dell to provide shareholders with the opportunity to vote for their proposal side-by-side with the 'going private deal' in a single meeting. They have also announced their intention to run a slate of directors at the Dell annual meeting if the current board does not agree to their proposal. They confirmed to implement their proposal if their slate of directors are installed on the board.
In Friday's regular trading session, DELL is currently trading at $13.43, up $0.11 or 0.83% on a volume of 53.38 million shares.
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