Carl Icahn has begun approaching investors in the hope of securing $5.2 billion in loans to back an alternative bid for PC maker Dell.
Icahn is one of Dell's largest and most vocal shareholders against the $24.4 billion proposal from the company's founder, Michael Dell. The buyout proposal, which equates to $13.65 per share, has been vehemently opposed by a number of the PC maker's investors. Icahn and Southeastern are among the dissidents. Catherine Christner is going so far as to file a suit with Delaware Chancery Court and accusing Dell's board of directors of selling "Dell on the cheap."
In a SEC filing, Michael Dell argues that the PC market is changing more quickly than anticipated, and in order to cater for shifting consumer demand, the PC maker has to go private. With the emergence of cloud computing and mobile technology, the company founder argues that Dell has to quickly transform into a Enterprise Solutions and Services (ESS)-focused firm in order to survive — which would be difficult to achieve if the company remained public.
In order to try and prevent Michael Dell from taking the PC maker private for what some shareholders argue is a poor return on their investment, Icahn and partner Southeastern Asset Management have proposed an alternative. As reported by Bloomberg, Icahn is attempting to secure $5.2 billion in loans to back his proposal for Dell to tender 1.1 billion shares at $14 a piece.
In order to keep Dell publicly trading, Icahn has also suggested raising $13.75 billion in debt financing.
The investor's proposal aims to secure more value for shareholders, but has been branded "unrealistic" by Dell in a regulatory filing. Dell believes that Icahn's proposal will result in a $2.9 billion shortfall, which will reduce dividends to $8.15 per share.
Dell's special committee says that the activist investor's proposal is "inconsistent" and lacks credibility, mainly due to the lack of data showing how financing is going to be secured.
Jefferies Group LLC is among the potential backers, with a source close to the situation stating that the firm may be willing to arrange a $2.2 billion six-year term loan and a $3 billion 3 1/2-year term contract.
David Novosel, an analyst at Gimme Credit LLC in Chicago, told the publication:
"Investors are clearly willing to listen and open to new ideas. The new proposal could have better or worse terms but investors on the debt side want to know what the equity commitments are. It helps Icahn if he offers concrete detail."
A vote on the deal is expected on July 18.