Dell Tries to Pacify a Hungry Icahn

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Dell (UNKNOWN: DELL.DL  ) has offered its three suitors millions to cover bid expenses, but with caveats. For activist investor Carl Icahn, who is the last suitor and holds the highest bid of more than $15.60 per share, this means he has to be very un-Carl Icahn-like in his proposal. Clearly, the Dell special committee wants this process to go down smoothly, without proxy battles and costly litigation. Where are we with the Dell takeover, and should investors believe Icahn's estimate that comes in north of $20 per share for the company?

Three houses
As has been widely reported by now, the Dell sale has attracted three bids in its "go shop" period, which concluded at the end of last month. The first player is founder and current CEO Michael Dell, who has partnered with private-equity firm Silver Lake Partners to offer $13.65 per share -- valuing the company at $24.4 billion. The stock trades over $14 today.

The second suitor is private-equity group Blackstone. As mentioned in a prior article, Blackstone stepped into the ring with an interesting card -- former Hewlett-Packard executive Mark Hurd. The firm believes Hurd, not Dell (the human), could bring Dell (the company) back to relevance as he did with his former employer. Blackstone's offer came in higher than Michael Dell's at $14.25 per share.

The third and final suitor, as mentioned, is Icahn and his holding company, Icahn Enterprises (NASDAQ: IEP  ) . As usual, Icahn is the wild card in the bunch, vowing to take the company on via proxy fights and lawsuits if he doesn't get what he wants. Icahn Enterprises currently owns roughly 100 million shares -- or more than $1.4 billion worth of Dell stock. He also leads the pack with a bid of $15.65 per share. Before his bid, the investor publicly expressed his opinion that the company is worth more than $22 per share.

What's a special committee to do?

Pay for play
Dell's committee is paying all three parties millions of dollars to cover their due diligence -- which may seem a little odd, but it sounds to me like they just don't want to beleaguer the issue. It's apparently a very peaceful, generous committee.

For Carl Icahn and Icahn Enterprises, the gift package comes in at $25 million. This good gesture came with a note, and one that I can't imagine reads well on Icahn's desk.

Specifically, the committee chastised Icahn as having "threatened the Company's directors with 'years of litigation' and a proxy fight if they do not conduct the transaction process in the manner" he prefers. Basically, if Carl Icahn acts like Carl Icahn during this process, he will not be gifted the $25 million, and the committee will be very upset.

Sounds like cannon fodder for the king of corporate raiding.

The word
Looking at the market price, which hovers above Michael Dell's offer and below those of the other two, investors and analysts seem to take everyone's offer lightly. Is Michael Dell selling his shareholders short with the offer? According to the market, other offers, and Icahn's original valuation of $22.81, the answer appears to be yes.

We don't know which way the committee will sway, or what will happen once it does. As has been the case for years now, investors are wise to stay away from Dell.

More from The Motley Fool
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.

Read/Post Comments (1) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 17, 2013, at 10:07 AM, rmkane59 wrote:

    Congratulations to the Dell Board for calling Carl on his litigation threats. When he first indicated his threats my first reaction was that it sounded like a slightly veiled form of Greenmail to me. Definitely did not sound right" to me.

    From an ownership standpoint I can not see how Dell would be even remotely in Carl's wheelhouse. What does he and his team bring to the table in the technology world? What value do they bring to the on-going organization/transaction?

    My guess is he takes the smaller position and then gets out with a modest gain when someone else (Blackstone) prevails.

    One man's opinion.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2354932, ~/Articles/ArticleHandler.aspx, 9/30/2016 1:07:32 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 3 hours ago Sponsored by:
DOW 18,143.45 -195.79 -1.07%
S&P 500 2,151.13 -20.24 -0.93%
NASD 5,269.15 -49.39 -0.93%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
DELL.DL $0.00 Down +0.00 +0.00%
Dell CAPS Rating: *
IEP $49.86 Up +0.10 +0.20%
Icahn Enterprises CAPS Rating: ***