Carl Icahn sweetens Dell deal

The activist investor is is adding his bid, as he believes CEO Michael Dell is getting away with the company too cheaply.

By TheStreet Staff Jul 12, 2013 11:51AM

thestreet logoTop of a Dell laptop Bobby Yip Newscom ReutersBy Chris Ciaccia


"Dude, you're getting a better offer."


After activist investor Carl Icahn told Bloomberg Television Thursday that he plans to enhance the Dell (DELL) deal, he confirmed the details Friday morning. Icahn is adding to his $14 per share offer for the majority of Dell by throwing in warrants. Through various vehicles, Icahn owns 8.7% of the struggling PC maker.


Already Thursday Icahn Told Bloomberg he is planning to add one warrant for every four shares purchased in the tender offer. The total value to shareholders would be $15.50 to $18 per share.

Icahn is no stranger to putting out news via different forms of media on the Dell deal. He recently joined Twitter, proclaiming his love for the micro-blogging site -- and the Round Rock, Texas Dell -- in his first tweet (TheStreet).

In an SEC filing, Dell disclosed Icahn's tweet:


ichan tweet


By adding the warrants, Icahn is hoping that arbitrage investors, primarily hedge funds, will be excited for this sweetener. Icahn has said that the major shareholder proxy firms, Institutional Shareholder Services (ISS) and Glass-Lewis, are wrong to support the offer from CEO Michael Dell and private equity firm Silver Lake Partners (TheStreet).


Many institutional investors, including Southeastern Asset Management, T. Rowe Price, Yacktman Asset Management and Pzena Investments, are opposing the offer from Dell and Silver Lake. Combined, these investors own approximately 18% of the company, and may still provide a roadblock to getting a deal done.


It came as a surprise to many that the proxy firms backed the $13.65 per share offer from Dell and Silver Lake. Many were expecting the bid from Icahn, in which he would pay $14 per share for 72% of the company and keep a portion of Dell publicly floated. The offer from Dell and Silver Lake takes the entire company private.


Dell, who owns 16% of his company, is trying to take the company private to help turn it around, amid struggles in the PC market (TheStreet).


ISS cited the risk of rejecting the offer, and a "meaningful loss of value" as reasons for accepting the lower offer. "After evaluating the risk of accepting the offer -- truncation of value if the business transformation is successful -- versus the risk of rejecting the offer -- meaningful loss of value if the business transformation falters -- ISS recommends clients vote FOR this transaction, which offers a 25.5% premium to the unaffected share price, provides certainty of value, and transfers the risk of the deteriorating PC business and the company's on-going business transformation to the buyout group," the proxy advisory firm said in a statement.


Shareholders are scheduled to vote on July 18 on the $24.4 billion buyout.


Dell shares were down slightly to $13.33 in early morning trading.


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