Billionaire investor Carl Icahn agreed to accumulate no more than a 10 percent stake in Dell Inc. as he continues to pursue an alternative to a $24.4 billion leveraged buyout by founder Michael Dell.
Dell gave Icahn a limited waiver to discuss a deal with other investors, while Icahn agreed not to join with other shareholders to build more than a 15 percent stake, Round Rock, Texas-based Dell said today in a statement. Icahn had received U.S. regulatory approval on April 10 to buy as much as 25 percent of outstanding shares, Dell said.
Chief Executive Officer Dell and Silver Lake Management LLC’s original bid to take the company private at $13.65 a share has been opposed by the company’s largest shareholders as too low. The computer maker said last month that it got competing offers from Icahn and Blackstone Group LP that may be superior, putting pressure on the founder to sweeten his terms or switch allegiances.
“The agreement shows that Icahn is being taken seriously by Dell’s board,” said Erik Gordon, a professor at the Ross School of Business at the University of Michigan. “Unless Silver Lake is willing to go to a higher price with Michael, Michael either jumps ship for Blackstone or risks being a huge and hugely disgruntled stockholder watching the company from the board room but not the executive suite.”
‘Superior Proposal’
Dell’s shares rose less than 1 percent to $14.11 at 9:42 a.m. in New York, 3.4 percent higher than the original bid. Through yesterday, the stock had advanced 38 percent this year, compared with an 8.8 percent gain for the Standard & Poor’s 500 Index.
“Granting the limited waiver to Mr. Icahn while capping his share ownership will maximize the chances of eliciting a superior proposal from Mr. Icahn, while at the same time protecting shareholders against potential accumulation of an unduly influential voting interest,” the company said in the statement.
Representatives for Dell, Icahn, Blackstone and Silver Lake didn’t immediately respond to requests for comment.
Icahn would pay $15 a share in cash for as much as 58.1 percent of the stock, while Blackstone’s plan values Dell at more than $14.25 a share.
Southeastern Asset Management Inc. and T. Rowe Price Group Inc., two of Dell’s biggest outside investors, have said Michael Dell’s offer undervalues the company he founded in his Texas dorm room in 1984.
A portion of Dell’s stock will remain publicly traded if Blackstone or Icahn prevail. That would allow current shareholders to share some of the gains if Dell Inc. successfully executes on a plan calling for the company to lessen its dependence on the shrinking PC market and diversify into more profitable sectors such as selling data storage services and business software. Dell’s largest independent shareholder, Southeastern Asset Management, has said it was leaning toward supporting one of the attempts to scuttle Michael Dell’s bid.
Dell’s special committee said it’s still backing the deal with Michael Dell and Silver Lake while it assesses the alternate proposals. Both Blackstone and Icahn are reviewing Dell Inc.’s books before taking the next step in their bids.
(Bloomberg News and The Associated Press contributed to this report)
