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Dell, Carl Icahn agree to ownership cap

Icahn last month submitted an alternative acquisition proposal that he said would be a better deal than the one Michael Dell and Silver Lake Partners had.
Written by Larry Dignan, Contributor

Dell and investor Carl Icahn agreed to a deal where Icahn entities couldn't acquire more than 10 percent of the company. Icahn also couldn't cut deals with other shareholders to acquire more than 15 percent of Dell.

The latest Icahn-Dell dealings come as the PC and server maker evaluates offers for its plans to go private.

Icahn last month submitted an alternative acquisition proposal that he said would be a better deal than the one Michael Dell and Silver Lake Partners had.

A special committee is now evaluating the offers. The Icahn ownership cap deal will expire when Dell goes private in any transaction or Jan. 15.

In a previous letter to Dell, Icahn outlined his master plan, which revolved around a $9 per share dividend. Icahn said:

Rather than engage in the Going Private Transaction, we propose that Dell announce that in the event that the Going Private Transaction is voted down by shareholders, Dell will immediately declare and pay a special dividend of $9 per share comprised of proceeds from the following sources: (1) $4.26 per share, or $7.4 Billion, from available cash as proposed in the Going Private Transaction, (2) $1.73 per share, or $3 Billion, from factoring existing commercial and consumer receivables as proposed in the Going Private Transaction, and (3) $4.26, or $5.25 Billion in new debt.

We believe that such a transaction is superior to the Going Private Transaction because we value the pro forma "stub" at $13.81 per share using a discounted cash flow valuation methodology based on a consensus of analyst forecasts. The "stub" value of $13.81 combined with our proposed $9.00 special dividend gives Dell shareholders a total value of $22.81 per share, representing a 67% premium to the $13.65 per share price proposed in the Going Private Transaction. We have spent a great deal of time and effort in determining the $22.81 per share value and would be pleased to meet with you to share our analysis and to understand why you disagree, if you do.

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