Icahn proposes new deal in Dell saga

By Quantum Capital Fund

It seems that the issue surrounding a possible Dell buyout has more twists and turns than a mountain path. In the latest development in the story, Dell investor Carl Icahn has teamed up with Southern Asset Management to come up with a buyout offer which will see stockholders hold onto their stock and take an additional $12 a share in either cash or stock.

This proposal comes less than a month after private equity firm Blackstone Group withdrew its high profile $24-billion bid to keep the company public.

Technology website cnet.com reports that Blackstone submitted a tentative offer to buy the company after Dell announced in February its plans to take the company private via a $24.4 billion, or $13.65 per share, buyout by its founder and CEO Michael Dell, who owns about 14 percent of Dell's common shares, and the private equity firm Silver Lake. Microsoft also kicked in a $2 billion loan toward the buyout, which still requires approval from a majority of Dell's shareholders in order to go through.

A key aspect of the latest Icahn offer is that the company will continue to trade as a public entity. Icahn has been outspoken that shareholder see more value in Dell trading as a public entity as opposed to it going private. The main reason that shareholders were opposed to the Blackstone and SilverLake deals were that they felt that the deals, significantly undervalued shareholder investment in the company; the new proposal by Icahn (who is a major shareholder in Dell) is still less than Blackstone and Silver Lake’s offer. However, Icahn probably feels that the future benefits that shareholders will see will be significantly more than if the company goes back to being private.

This re-enforces the belief that the decision to go public is one of the biggest decisions that a company can make. By making the decision to go public, a company’s fate is never completely in the hands of the board of directors. Any Dell buyout, be it the Icahn option or the Silver Lakes option, needs to be approved by the majority of Dell’s shareholders before going through. And there is no doubt that they will want to see a significant return on investment before giving the deal the go ahead.