Carl Icahn, the billionaire activist investor, has sweetened his potential bid for Dell Inc. by adding warrants to the deal.
Warrants are rights to buy securities in the future.
Icahn is pushing for shareholders to defeat a buyout proposal for the Round Rock-based company led by founder and CEO Michael Dell. Icahn has not yet not made a formal offer to buy control Dell Inc., but he does have a plan for what he would like to do when he gets the chance.
Dell Inc. shareholders will vote on the $24.4 billion Michael Dell buyout plan on Thursday. Michael Dell and his financial ally, Silver Lake Partners, are offering $13.65 a share for all the company’s stock with the plan to take the company private and complete its business transformation.
Icahn’s plan calls for offering $14 a share for 72 percent of Dell Inc.’s shares in a proposal that is expected to cost $15.6 billion. Of that amount, Icahn would raise $5.2 billion in a debt offering. The rest of the funds would come from Dell Inc.’s cash holdings and the sale of Dell receivables.
Icahn on Friday said he is sweetening his plan by offering a warrant for ever four shares held by Dell Inc. investors. The warrant would entitle the holder to buy Dell Inc. shares for $20 each within the next seven years.
Icahn estimates that the warrant would raise the value of his plan for the company to between $15.50 and $18 a share, from the original $14.
However, if the company’s stock never reaches $20 a share, then the warrants would be worthless. Dell Inc.’s stock last traded for $20 a share in 2008, just as the global recession was taking hold.
Analyst Brian Marshall with ISI Group said Icahn’s latest sweetener wasn’t very sweet.
“I don’t think it sweetens anything,” Marshall said. “The last time the stock was in the $20s was about five years ago and earnings estimates were about 50 percent higher. We still recommend that investors take the Silver Lake/Michael Dell $13.65 cash offer and run for the hills.”
Icahn can only make his offer for the company an official one if the Michael Dell buyout proposal is defeated and if Icahn can win a favorable response from the Dell Inc. board or elect his own slate of directors.
Dell Inc. is Central Texas’ largest private employer, with about 14,000 workers here.
A showdown for Dell Inc.’s future is playing out between two billionaires: Founder and CEO Michael Dell and activist investor Carl Icahn. At stake is the future of Central Texas’ largest – and perhaps most high-profile — private employer. On Page One