Michael Dell asks shareholders to support his buyout bid
22 June 2013
In a bid to garner support for his planned $24.4 billion buyout, Dell founder and CEO Michael Dell said an alternative proposal by billionaire Carl Icahn would hurt efforts to transform the company into a broader provider of business products and services.
The proposal would increase debt subtantially, decrease financial flexibility and ''hurt the company's ability to weather an economic or business downturn,'' Dell said today in a regulatory filing. ''It would also jeopardize customer perception and employee retention.''
The CEO is highlighting the negative aspects of Icahn's offer ahead of a shareholder vote to be taken next month, seeking to attract backing for his plan to take the third-largest personal computer maker private with Silver Lake Management LLC. Icahn and partner Southeastern Asset Management Inc called on the PC maker this week to make a tender offer for about 1.1 billion shares at $14 apiece, his third push to derail the $13.65-a-share buyout proposed by the CEO.
''Completing Dell's transformation as quickly as possible is essential,'' CEO Dell said in the filing. ''Accomplishing Dell's transformation is more challenging as a public company.''
Margins and earnings would worsen in the short term as Dell adapted to new trends including cloud computing, expanded sales coverage, and competed in developing countries, which would probably lead to Dell's share price further declining, which would in turn dim customers' view of the company and make it difficult to keep staff, he said.
If his buyout proposal failed to cut ice with shareholders, Dell reiterated that he would remain with the company but said he would also oppose the kind of imprudent leveraged recapitalisation that had been suggested by certain other parties.
Activist shareholder Carl Icahn, who says Dell's offer undervalued the company, promised shareholders that the company would buy back up to $16 billion of stock if they joined his campaign to stop the computer maker from going private.
According to Icahn, Dell could fund a tender offer for its own shares with debt financing.
Dell along with private equity firm Silver Lake wants shareholders to accept a $24.4 billion bid, to take the company private while it transformed itself into a technology consultant for large companies, along the lines of International Business Machines Corp.