Less than three weeks before a Dell Inc. shareholders meeting on July 18, one disgruntled shareholder continues to criticize the proposed management buyout while another, New York billionaire Carl Icahn, might be close to gathering the financing he needs to make his own formal offer for the Round Rock company.
Icahn appears be close to gathering the commitments he needs for the $5.2 billion, six-year loan he needs to make an offer to buy most of Dell Inc.’s stock for $14 a share, according to report in the New York Post, citing an unnamed source.
If he does secure the loan commitments, Icahn’s alternative proposal to pay $14 a share for 60 percent of the company’s shares might gain more support. Icahn’s latest plan calls for raising a total of $15 billion, including the loan. The remaining funds would come from Dell Inc. cash and from borrowings backed by company receivables..
Icahn is attempting to mount an alternative to the $24.4 billion management buyout proposal being made by company founder and CEO Michael Dell and Silver Lake Partners, a California investment company. That offer amounts to $13.65 a share for all the company’s shares. If shareholders approved that deal, then Dell Inc. is expected to go private.
Icahn wants shareholders to reject the Michael Dell/Silver Lake deal so that the company can consider his plan, with is the latest of three different plans proposed by Icahn for the company since March.
The special committee to Dell Inc.’s board of directors has criticized all three of Icahn’s plans as “concepts” that lack enough supporting information to be considered authentic offers for the company.
Icahn’s main ally in the fight against the Michael Dell buyout has been Memphis-based Southeastern Asset Management Inc., which reported last week that it had agreed to sell half of its Dell Inc. holdings, or about 71.7 million shares.
Southeastern, in a filing with securities regulators made Thursday, said Michael Dell and Silver Lake could realize an annualized return of just over 50 percent over the next four to five years if their “take-private” proposal is approved by shareholders and if the turnaround effort that the propose is successful. That large potential profit, is part of the reason Southeastern and Icahn say the Michael Dell/Silver Lake plan undervalues the true worth of the company and so short-changes shareholders.
Last week, in his own appeal to shareholders, Michael Dell said his plan insulates shareholders from the further risks the company expects to undertake as it attempts its to shift more of its business toward providing advanced hardware, software and services to enterprise customers. Part of those risks involve dealing with the continued slump in personal computer sales caused in part by rising sales of smartphones and tablets.
If the company were to stay public during the proposed turnaround effort, some of the moves management expects to make could reduce earnings, deflate the stock price and undermine the loyalty of employees and customers.
In the meantime, Dell Inc. must cope with the continuing slump in the personal computer market.
International Data Corp., in a forecast released Friday, said it expects the PC slump will continue the rest of this year although shipments of computers might strengthen in the second half of the year.
IDC expects PC unit shipments will drop by 11.7 percent in the second quarter, compared with last year. Shipments in the first quarter were down by 13.3 percent. It also expects that PC shipments for all of 2013 will be down 7.8 percent from last year, when they declined 4 percent from 2011.
“May results reflect deteriorating conditions rather than improvement and the market will probably fall short of projections,” said Loren Loverde, IDC’s program director for its quarterly PC tracker program. He added that shipments should improve in the second half because of the back-to-school and holiday selling seasons.