The special committee of Dell’s (NASDAQ:DELL) board implemented a go-shop period as a condition of their acceptance of the offer made by founder and Chief Executive Officer Michael Dell. Just before the period expired on March 22, both Blackstone Group (NYSE:BX) and billionaire activist investor Carl Icahn made offers for Dell. In order to avoid giving the appearance of a conflict of interest, given Mr. Dell’s position as a company insider, the special committee that supervised the offer put in place a 45-day go-shop period in which the company could “actively solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals.”
Blackstone withdrew its bid in mid-April, citing concerning industry data. Research firms IDC and Gartner reported just a week earlier that PC sales had contracted by an unprecedented amount; IDC said sales fell 14 percent, the fourth consecutive quarter of year-over-year declines and the biggest drop in two decades. Given the complexity that a turnaround of Dell would entail — especially as the company is woefully behind the current technological trend toward mobile computing — the firm decided the investment was too much of a risk.
But Carl Icahn’s offer is still only the table. On Monday, the special committee of Dell’s board asked Icahn for details of his plans for the struggling PC-maker, including how he would finance his offer and who would run the company.
Icahn and Southeastern Asset Management, Dell’s two largest shareholders, offered $21 billion in cash for Dell last week, challenging the $24.4 billion bid put forward by Mr. Dell. He and private equity firm Silver Lake want to take the PC-maker private for $13.65 per share, but shareholders, including Southeastern and T. Rowe Price (NASDAQ:TROW), have argued that the proposal severely undervalued the company. But in a rival bid, Icahn and Southeastern have decided to offer stockholders $12 for every share they own and allow them to keep their stock. Southeastern and Icahn said they would finance the bid from existing cash and approximately $5.2 billion in new debt.
Following this announcement, Dell’s stock dropped 0.2 percent to $13.42 in morning trading.
The committee said in the letter to Icahn, seen by Reuters, that it was unclear whether he intended to make “an actual acquisition proposal that the Board could evaluate” or if he meant his offer to be an alternative in case the pending sale to Silver Lake and Michael Dell is not approved. They also asked for additional information on the terms of the debt financing necessary for Icahn’s proposal and “contingencies available if cash on hand or stockholder rollovers are less than anticipated.” The letter noted that his proposal did not appear to take into account additional borrowing that would be required if Icahn uses the company’s cash in the transaction.
In regards to management, Dell’s committee wanted more information about the company’s senior management team under Icahn, his “strategy and operating plan,” and the relationship between Icahn and Southeastern.
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