Two of Dell Inc.’s biggest outside investors on Monday laid out the most comprehensive defense of their plan for the company to date, while attacking the company’s planned $24.4 billion sale to Michael S. Dell and the investment firm Silver Lake.
In a presentation for fellow investors, Carl C. Icahn and the money manager Southeastern Asset Management argued that Dell remained worth much more than the $13.65 a share that Mr. Dell and his partner are offering. Instead, the alternative proposal â€" in wich the company would buy back 1.1 billion shares at $14 each â€" would offer existing stockholders more money while giving them a chance to keep a piece of the company.
The presentation by Mr. Icahn and Southeastern, which was used as part of their presentation to the proxy advisory firm Institutional Shareholder Services, was meant to counter criticisms by both Mr. Dell and Silver Lake and by a special committee of the computer maker’s board. Both have said that the stock-buyback plan would leave the company over-indebted while still exposing shareholders to significant risk.
But Mr. Icahn and Southeastern contended that Dell could still move to transform itself into more of an enterprise software and services provider while remaining a publicly traded concern, pointing to exam! ples like Apple Inc. and I.B.M.
“Why is the board pushing a deal that would force stockholders to sell their shares at what Icahn and Southeastern perceive to be a substantially undervalued price?†the investors wrote in their presentation.
They also criticized the performance of Dell under the founder for which it is named: since Mr. Dell’s return in 2007, the company’s total stock return has fallen 44 percent, while its share of the PC market has dropped 25 percent.
Meanwhile, the investors argued that their proposal would leave Dell with less debt than the proposed leveraged buyout by Mr. Dell and Silver Lake. The alternative plan would give the cmpany a ratio of net debt to earnings before interest, taxes, depreciation and amortization of about 1.7 times, the two contended. Mr. Dell’s plan, by contrast, would lead to a ratio of 3.7 times.
Mr. Icahn and Southeastern also argued that the Dell special committee had made any alternative to the leveraged buyout plan all but impossible to accept, and that “go-shop†provisions aimed at flushing out higher offers often fail. (The two neglected to mention that an earlier proposal by Mr. Icahn, in which he would have paid $15 a share for 58 percent of the company, had been considered reasonably likely to lead to a superior offer. Mr. Icahn subsequently backed away from that model in favor of more indirect ways to gain control, like the stock buyback plan.)
The two dissidents are betting that they can apply heavy pressure to Mr. Dell. Under the terms of the leveraged buyout, a majority of shares not held by the company’s founder must be affirmatively voted in favor of that deal, or ! roughly 4! 3 percent of outstanding shares. Per those rules, abstentions count against the take-private transaction.
Mr. Icahn and Southeastern together own about 13 percent of Dell’s stock. A number of other investors representing more than 5 percent have previously expressed displeasure with Mr. Dell’s bid.
A vote on Mr. Dell’s offer is scheduled for July 18.
