Icahn blasts buyout deal, tells Michael Dell to stop whining

Icahn blasts buyout deal, tells Michael Dell to stop whining

Summary: Investor Carl Icahn has ripped apart the Dell founder's actions to take the PC maker private, and asked the CEO to stop whining about the terms on his own proposition.

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TOPICS: Dell
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Credit: Dell

Activist investor Carl Icahn is a vocal opposer of Michael Dell's plans to take PC maker private, and he isn't afraid to let everyone know it.

The six-month conflict between Icahn and the company's founder seems to be far from finished. In February, Michael Dell and partner Silver Lake originally offered investors $13.65 per share -- valuing the company at $24.4 billion -- in order to go private.

The company founder and CEO said that the change was necessary in order to blind Wall Street to the firm's financial status, and allow the company to pursue a different direction quickly and without answering to shareholders. Michael Dell argues that the PC climate is changing "faster than anticipated" due to mobile and cloud computing, and in order for Dell to survive, the once-dominant PC maker must focus on Enterprise Solutions and Services (ESS) products rather than personal computing.

However, a number of investing parties took umbrage to the buyout terms, claiming that Dell was being sold "on the cheap." As a result, Icahn countered with a share buy-back proposal which valued shares at $14 each, or allow investing parties to gain $12 special dividends and the option to hold Dell stock in the future.

Dell warned shareholders that Icahn's proposal "misrepresents the risks and costs involved," and the company's CEO attempted to raise last-minute support for the plan by visiting the largest Dell investors in person, and instructing the firm's special committee to pitch the smaller shareholders.

As investors remained unconvinced and the threat of failure loomed, the original offer was increased by 10 cents per share to $13.75, which is now Michael Dell's "best and final offer." To give investors time to mull over the new offer, a vote on the buyout was also delayed, and will now take place on August 2.

It still may not be sufficient, and the last-minute changes have raised the ire of Icahn, who has issued an open letter to Dell stakeholders -- responding to a recent interview in which the company founder further pressed his claim that the buyout deal was the way forward.

In a recent interview with the Wall Street Journal, Michael Dell said that whether or not his plan to buy out the company succeeded, he intends to remain chief executive. In addition, changes to the voting rules means that the buyout will go ahead of the majority of votes are in approval, instead of counting all shares -- which would count withheld votes as a "no."

Dell argues that under the old system, "it only takes about 23 percent of the outstanding shares to block the transaction. This is an unfair result that does not accurately reflect what the shareholders want." Although considering Southeastern's opposition as a "compliment," the company founder also says that Icahn was not a shareholder when the deal was announced, and has used the situation to "buy into the company and organize a blocking position with a minority of the company's shares."

This is the reason why Michael Dell has requested the change in voting standards, and the increased bid is meant to sweeten the pot and push for the voting change to be accepted. In other words, to make the founder's bid to take the PC maker private happen.

In response to the interview, Carl Icahn sent an open letter to shareholders, which can be found in full on CNBC. Icahn argues that "instead of accepting defeat with dignity," based on a lack of support from previous shareholder meetings, the CEO simply complains that the Merger agreement is "unfair" -- even though Michael Dell and Silver Lake agreed to the terms in the beginning.

"Is it Michael Dell's alter ego who keeps whining about the unfairness of an agreement that he himself asked the Dell Board to accept?," the letter says. "I might be able to understand the actions of Michael Dell, who does not wish to lose a golden opportunity, but I cannot understand the actions of the Dell Board. The Dell Board approved a merger at what I believe to be a very undervalued price but they at least made it clear that an affirmative vote of a majority of the outstanding unaffiliated shares would be required."

"The shareholders have spoken," Icahn commented. Calling the proposed changes a "travesty," the disgruntled investor claims that Michael Dell may be saying the shareholder has "no right to meddle with [the] 'super Dell' deal" as he was not a stockholder when the process began. In addition, the board's current behavior has caused him "outrage."

"While I am enraged, the major reason I am involved is that I believe the Michael Dell/Silver Lake transaction undervalues the company," Icahn writes. "I have spent many hours discussing Dell with experts, and there are many reasons to believe Michael Dell/Silver Lake's proposal materially undervalues the company."

In conclusion, Icahn believes that the company's main liability is the CEO, and the company will be worth "far more" if the founder's old regime is rooted out -- and this step is "necessary" to turn the firm around. In a final bid to sway stockholders, Icahn says:

"I believe you will be happier and richer if you join me in voting against the Michael Dell/Silver Lake deal. I can't help but note that Michael Dell has fared much better selling over 62 million shares in the $32 to $40 range over different periods in the past 10 years. Unfortunately for stockholders, he seems to be a much better market-timer than a CEO.

It is time for Michael Dell and the Dell Board to go."

Topic: Dell

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9 comments
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  • F-Dell

    Go under already. We won't miss you in the least.
    And while you're at it, please take Mictosoft with you.
    itguy10
    • Since you know neither of that will happen

      Will you go away already? We won't miss you in the least.

      And while you're at it, please take the other trolls with you.
      William Farrel
    • Who better than Michael Dell should lead his namesake company?

      The Dell company -- nay, the whole PC industry -- is facing a tough future. It must shift its ideology and focus to "post-PC" products and services. It certainly seems to me that Michael Dell is well-aware of this fact, and is ready to grab the proverbial bull by the horns and lead his company boldly into the future.

      I have done some reading on Carl Icahn (Google him if you haven't), and he appears to be little more than a greedy, ruthless corporate raider who has a proven track record of hostile takeovers, followed by company breakups and sell-offs, handsomely lining his own pockets while leaving a smoldering trail of fail and destruction in his wake. He has made no secret about his slash-and-burn plans for Dell either: "It is time for Michael Dell and the Dell Board to go." How smug can he be?!

      I don't know either of these men personally, nor do I know all of the details of the proposed buyout or the boardroom politics involved, so I am certainly in no position to pass judgement on any of this. BUT, as a strictly outside (and slightly educated) observer, the whole Icahn thing just plain stinks.

      Michael Dell founded and built his own company into one of the premier PC hardware manufacturers in the world. If he has some ideas about the future of the marketplace and the direction he would like to steer *his* company in, well then, Hip Hip Hooray, Boy Howdy! Please tell me how Icahn, a rapacious 77-year-old man, net worth ~$20B, clearly driven by his own avarice, comes to know so very much about what's best for Dell Corp.?

      Bloody Hell, the very technology industry iteslf is a topsy-turvy rollercoaster -- a fickle beast which changes direction almost daily. The truth is that Icahn knows just about Jack Diddly Squat about technology, couldn't really care less, and is simply eyeballing the fat pockets of Dell investors as he prepares to try to harpoon this whale of a takeover opportunity.
      BGunnells
  • DELL_2

    Michael Dell is richer than god at this point. Rather than trying take Dell back, why doesn't he do what Steve Jobs did when he was kicked out of Apple, and start his own company rather than playing power games at the original Dell. If he has a vision for where Dell should go, there's nothing stopping him.
    **owly**
    • You've never run a business, have you?

      Its a far-cry harder to "just" start a new business than it is to revamp one. Like him or not, Dell had a vision and made it a reality. For many years, Dell made some excellent products and helped move the industry forward. In a climate of thin, really thin, margins and companies like HP who can afford (for awhile) loss leaders to sell below market, a new up-start has everything going against it. A private Dell Company on the other hand could make a significant move forward. The drama around all of this is sickening, but if Icahn wasn't such an egomaniac, this whole thing would have been over long ago. Why did Icahn buy up Apple instead... there's lots of room to sit around and complain there too.
      ccs9623
    • Dell is no Jobs, 2013 is no 1985...

      Very few people could do what Steve Jobs did, especially today. Not entirely because of who Jobs was, either -- there was an extremely different "technological climate" in 1985-1995 as compared to now.
      alboulley
  • Ichann ot stand him..

    Everything Ichann touches usually gets piecemealed and sold anyway.. If I was a stockholder I would go for dell's offer in a heartbeart and get Ichann out of the picture..
    Nick Zamparello
  • It's Time for a Change

    The tale of an entrepreneur who started a PC company in his dorm room in 1985 is a great american success story. However, not every entrepreneur is a great business man. The PC has run it's course and Michael won't let it go. Since returning as CEO in Jan 2007 the stock has dropped from $23.57 to $12.84. Few companies would allow a CEO to remain in power for more than 5 years when the stock is down nearly 50% during his tenure. It's time to bring in a business man with experience running a $60B firm with 100k employees with a world wide presence.
    salesguy25
  • strange...

    Hard to know where his head is at but given Ichann didn't build DELL into the company it is today you can understand why given his reputation someone like Michael DELL who is a true inspiration would have issue with him. Ichann himself has never done anything inspirational unless you're a pure capitalist with no regard for people or dreams. I hope Michael Dell is able to move his company in the direction he wants and keep DELL from becoming just another one of Ichann's acquisitions. At the end of the day he doesn't give a crap about DELL, the people in the company, the technology or anything else except how much money he can make from it. People like him as rich as he is should leave the visionaries like Michael Dell do what they do...make the world a better place.
    GeiselS