Dell board warns Icahn bid could leave the company short of cash
Dell's board has told activist investor Carl Icahn it needs more information in order to evaluate his latest bid
IDG News Service - A plan proposed by Carl Icahn and Southeastern Asset Management last week as an alternative to Michael Dell's proposal to take his namesake company private would leave it short of cash, Dell's board warned the bidders on Monday.
It wants to know more about the proposal -- including who the bidders plan to put in charge of the company -- before it can formally evaluate it, the board told the investors in a letter made public Monday.
The company is already considering a proposal from founder Michael Dell and private equity firm Silver Lake to take the company private, and under the terms of that deal cannot formally consider any new bid unless it appears to be a superior proposal.
It's not clear whether Icahn's plan is intended as an actual acquisition proposal that the Board could evaluate and potentially endorse or accept, or as an alternative it could consider if the pending sale to Silver Lake and Michael Dell fell through, the Special Committee of the Board of Directors wrote in the letter to Icahn and Southeastern.
The committee asked Icahn for a draft of the definitive agreement concerning the proposed transaction, and for details of how Icahn and Southeastern planned to finance it. It also asked who they planned to put in charge of the company, and what role the senior management team would play in arranging the financing.
The proposal made last Thursday will leave Dell short of working capital and potentially without the means to pay off $1.7 billion in debt maturing within 12 months of the deal's closing, the committee wrote. In addition, the proposal does not appear to consider additional borrowing needed to make up for use of the company's cash in the transaction, nor that the proposed sale of accounts receivable will reduce future cash flows, it wrote.
The committee also questioned Icahn's assertion that holders of at least 20 percent of Dell's shares will choose to receive additional shares rather than the $12 per share windfall Icahn proposed. Icahn, Southeastern and affiliated entities appear to control around 12 percent of the company's shares, the committee wrote. It asked for either proof of the commitment of the other 8 percent, or for Icahn's plans to finance the additional windfall payments.
Shareholders tempted to accept additional stock under Icahn's plan -- if it becomes a firm proposal -- are in the dark about whether the new stock would be taxable. The committee asked Icahn to provide his analysis of the tax question.
Peter Sayer covers open source software, European intellectual property legislation and general technology breaking news for IDG News Service. Send comments and news tips to Peter at email@example.com.
- 15 Non-Certified IT Skills Growing in Demand
- How 19 Tech Titans Target Healthcare
- Twitter Suffering From Growing Pains (and Facebook Comparisons)
- Agile Comes to Data Integration
- Slideshow: 7 security mistakes people make with their mobile device
- iOS vs. Android: Which is more secure?
- 11 sure signs you've been hacked
- HP HAVEn: See the big picture in Big Data HP HAVEn is the industry's first comprehensive, scalable, open, and secure platform for Big Data. Enterprises are drowning in a sea of data...
- Piecing Together the Business Intelligence Puzzle Business intelligence (BI) technology collects and analyzes company data, delivering relevant information to corporate decision-makers in an effort to produce favorable outcomes.
- Harness IT -- An Introduction to Business Intelligence Solutions Learn the key selection criteria required to provide your organization with the capability to address structured data, unstructured data and mobile demands so...
- Business Intelligence Shows its Smarts Today's Business Intelligence (BI) tools provide a new way to think about data with self-service capabilities and user-friendly analytics that can be used...
- Cloud Knowledge Vault Learn how your organization can benefit from the scalability, flexibility, and performance that the cloud offers through the short videos and other resources...
- Testimonial: Cystic Fibrosis Trust Peter Hawkins, the Head of IT for Cystic Fibrosis Trust, discusses the role CommVault's Simpana software platform plays in improving the company's information... All Data Center White Papers | Webcasts