Founder told to sweeten offer for Dell as Icahn ups the stakes
NEW YORK (Reuters) - Michael Dell has been advised to raise his $24.4 billion offer for Dell Inc, coming under further pressure as billionaire investor Carl Icahn revealed he had committed more than $3 billion to back an alternative proposal.
The PC maker's special committee told Dell's founder and chief executive a few days ago that he should raise his offer if he wants it to succeed, a person familiar with the matter said on Tuesday.
The special committee, which was formed to independently assess what the best option for Dell shareholders is, came to that conclusion based on its meetings with investors as well as concerns over a key upcoming recommendation by investment advisory firm ISS, the person said.
ISS is expected to publish its view on whether Michael Dell's offer, which is backed by equity financing from buyout firm Silver Lake, is in the interest of Dell's shareholders as early as next week. A July 18 shareholder vote on Dell's take-private plan will follow.
Despite being advised by the special committee that he should raise his offer to see the transaction through, Michael Dell was non-committal, the person added, confirming an earlier report by Bloomberg News.
Dell Inc and Silver Lake declined to comment.
The special committee's move came as Icahn and his affiliates disclosed on Tuesday they had provided $3.42 billion, or 66 percent, of the debt financing to back his bid for Dell.
Investment bank Jefferies & Co provided $1.6 billion, or 30 percent of the overall $5.2 billion in committed financing with the remainder of about $179 million coming from 14 institutional funds, including pension funds and insurance companies, according to a U.S. Securities and Exchange Commission filing.
"The fact that he could not get lending from other banks suggests they are not too friendly to this," said Steven Kaplan, a University of Chicago finance professor. "However, one must note that a few banks are locked up with the Silver Lake offer."
"On the positive side, Icahn is putting a lot of money where his mouth is," Kaplan added.
Other market participants evaluating the transaction said Icahn's move could indicate he may never have aimed to broadly distribute the deal in the first place.
Calls to Carl Icahn, who runs Icahn Enterprises LP, were not immediately returned.
Icahn and Southeastern Asset Management are preparing an offer that would see shareholders tender 1.1 billion shares at $14 apiece, rivaling Michael Dell's and Silver Lake's $24.4 billion buyout offer of $13.65 a share.
The billionaire investor has said Michael Dell's offer substantially undervalues the company. Dell's special board committee had recommended Michael Dell's offer to shareholders.
While the financing commitment marks a crucial step forward for Icahn's bid for Dell, it is contingent on a dozen board appointments, according to the SEC filing.
Unless all 12 of the nominees proposed by Icahn and Southeastern on May 13 are elected to Dell's board, the financing is unlikely to take place.
Icahn's proposal will also be put to shareholders only if the offer by Michael Dell and Silver Lake is not accepted by shareholders when they meet on July 18.
'GAME OF CHICKEN'
All eyes are now on ISS. If it moves against Michael Dell's offer, he will be under even more pressure to raise it.
"It's a game of chicken," a shareholder said. "Icahn's going for the bump."
Speculation about a possible bump in the offer price began on Tuesday with a CNBC report that cited sources claiming that Michael Dell's camp was not feeling confident that ISS will recommend his offer. An ISS spokeswoman, however, said that ISS was still working on its analysis and never signals its recommendation in advance.
Another person familiar with the matter reiterated on Tuesday that neither Michael Dell nor Silver Lake have made any decision on whether to increase their offer.
All sources spoke on condition of anonymity because the matter is confidential.
The $5.2 billion financing deal put together by Icahn was shown to a mix of U.S. and foreign banks, asset managers, hedge funds and collateralized loan obligation (CLO) managers.
Icahn's proposed tender offer will be financed with $7.5 billion of cash on the balance sheet, the $5.2 billion credit facility and $2.9 billion from the sale of receivables.
If Icahn's proposal prevails, the loans would launch to a more broad range of institutional investors before September 30, or the three-month commitment period of the $5.2 billion loans, according to sources.
- Tweet this
- Share this
- Digg this
- Canada's parliament attacked, soldier fatally shot nearby |
- Attack on parliament, killing of soldier stun Canada's capital |
- Hungary plans new tax on Internet traffic, public calls for rally
- UPDATE 1-Tennis-WTA Finals women's singles round robin red group results
- Some U.S. hospitals weigh withholding care to Ebola patients