Dell committee requests information on Icahn, Southeastern proposal

The Special Committee of the Board of Directors of Dell has requested additional information on the investor's attempt to stop Dell going private.


Dell's Special Committee has asked for additional information concerning Carl Icahn and Southeastern Asset Management's alternative to the buyout deal proposed by founder Michael Dell and Silver Lake.

Today, the committee -- which is reviewing the original proposal to buy out the PC maker -- sent a letter to Icahn and Southeastern requesting additional information related to the alternative deal, which was submitted by the two investors on May 9.

The suggestion outlined by Dell's largest shareholders suggests that instead of accepting a $24.4 billion buyout led by the company's founder and private equity firm Silver lake, shareholders could be granted either $12 per share in cash or $12 in additional shares for each share currently held, in addition to retaining current shares.

The Special Committee of the Board of Directors of Dell ask within the letter whether the investors "intend to formulate the transaction as an actual acquisition proposal that the Board could evaluate and potentially endorse or accept or rather to propose it as an alternative that the Board could consider in the event the pending sale to Silver Lake and Michael Dell is not approved."

If the two investing parties want the potential alternative to Dell going private to be considered, the committee says that it needs clarification on a number of points. Icahn and Southeastern have been asked to provide a draft definitive agreement on the full terms and structure of the potential transaction, and how definitive it would be based on future events. In addition, the committee has asked for details concerning how the transaction will be financed, how debt financing will be managed, and what contingencies are available.

Draft commitment papers have also been requested so the board can determine how certain the closure of the alternative buyout deal would potentially be. The proposal assumes that at least 20 percent of stockholders would be happy to accept additional Dell shares, and the committee want to see proof of this before continuing the investigation.

The letter notes that following the closure of the deal, "the company is likely to have significant cash needs," including additional borrowings and the necessary reduction of reducing future cash flows due to the necessary liquidation of assets. In addition, the board have concerns over how $1.7 billion of debt maturities taking place within approximately 12 months after closing will be addressed.

Finally, the committee has asked the investors to outline which individuals they would prefer to see in senior management roles at Dell following the transaction, how these people would arrange the financing required, and what strategy Icahn and Southeastern would expect the team to implement to complete the deal.

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