Icahn firm on Dell buy

Carl Icahn reiterated his interest in owning Dell and said the $US5.2 billion in financing he's putting together to back his bid for the company continues to move forward as planned. The comments came in a telephone interview Tuesday, echoing statements he made earlier in the day in an open letter to Dell shareholders.

"Nothing has changed regarding the financing," Icahn said. "We expect to have $5.2 billion in the next couple of weeks. Our investment bank is already committing $1.6 billion and my affiliates and I would provide $2 billion, if necessary."

Icahn's letter to Dell's shareholders comes on the heels of a series of reports that Icahn could exit the Dell race after struggling to raise the $5.2 billion in debt he needed to back a leveraged recapitalization he proposed to Dell's board on May 9.

In May, Icahn initiated talks with banks and asset managers to line up financing to back a leveraged recapitalization of Dell as an alternative to an existing buyout offer led by Dell and Silver Lake Partners for $13.65 a share, or $24.4 billion. Jefferies & Co, which has already committed $1.6 billion, is leading the deal.

Icahn's time is ticking. Next month the company's shareholders are expected to vote on whether to accept the Silver Lake bid. In order to prove his commitment is legitimate, Icahn needs to have the financing ready by then.

Though the letter offers little additional details about the progress of the financing, it signals a change in the activist investor's strategy.

Under the May 9 leveraged recapitalization plan, Icahn proposed giving shareholders the option of receiving either a distribution of $12 per share in cash or $12 per share in stock valued at $1.65 per share. Now, Icahn is asking that Dell shareholders agree to a tender offer for 1.1 billion shares at $14 apiece in a stock buyback.

Icahn and Southeastern, which together own about 13 percent of Dell stock, have argued that the Dell and Silver Lake offer of $13.65 undervalues the company and that the recent numbers reported by the company are understated.

"Despite the company using scare tactics concerning the company's health, you cannot get away from the fact that their own consulting firm, BCG, believes the company would earn $3.3 billion for 2014," Icahn said. "This means the 670 million shares left outstanding after our tender will earn $3.72 per share."

Dell's proposed take-private sale price has undergone several iterations starting at $11.22 to $12.16 per share, a pricing proposed by Silver Lake in October during the early stages of the take-private conversations.

In the letter, Icahn revealed he is now Dell's second-largest shareholder after Michael Dell. This, after he purchased half of Southeastern's Dell shares for $13.52 apiece, bringing Icahn's total ownership to 152 million shares, or 9 percent of company shares.

LACK OF COMMITMENT

Icahn's lack of a firm financing commitment and Southeastern's reduction in holdings has caused some to wonder whether Icahn's offer is workable.

In a statement, Dell's special committee of independent directors said Icahn's latest proposal is incomplete.

"Mr. Icahn's concept is not, in its present state, a transaction that the special committee could endorse and execute - there is neither financing, nor any commitment from any party to participate, nor any remedy for the company and its shareholders if the transaction is not consummated," said the committee in a written response to Icahn's letter.

A spokesperson for Dell's special committee declined to comment beyond the statement issued Tuesday. A spokesperson for Michael Dell declined to comment.

Other investors wonder if Icahn is truly committed to buying the computer maker and not just seeking to drive up the price of the stock.

"Icahn is historically known for looking for dislocations," said a Dell shareholder. "This could be him trying to get Michael Dell to sweeten the $24.4 billion deal. Perhaps he does want to own the entity because the numbers do work. But our expectation is that we get a revised deal at $14 or higher," the shareholder added.