Corporate Law Blog

Weighing Going Private or Sale to Carl Icahn, Dell Cuts Off Info

As Dell Inc. considers its future after a massive loss in value over the past decade, the question may fundamentally be this: are the company's problems are the result of poor leadership or a relatively straightforward matter of shedding its stock obligations?

Two proposals are on the table. First, founder Michael Dell has proposed taking the company private by buying out the company's stock for $24.4 billion through a private equity firm called Silver Lake. Second, business magnate Carl Icahn's Southeastern Asset Management has offered to buy Dell for $12 in cash per share. Unfortunately, it's not clear how the buyout negotiations are going.

An unquestioned leader in the personal computer industry in the 90s, Dell had lost some $68 billion in stock market value by 2010, reportedly due to a change in its customer base and inability to respond to Apple's iPhone and iPad products. Sales at Dell continue to shrink, reportedly showing a 79 percent drop in a quarterly profit report filed last week.

As part of the buyout negotiations, Icahn sent a letter on seeking more detailed information from Dell, including data room access for a certain potential lender This week, however, a special committee of Dell’s board of directors sent Icahn a letter refusing access to that information until it can determine whether his offer is “superior” to Michael Dell’s.

Meanwhile, Dell insisted upon more information from Icahn -- such as whether his offer is even serious. In its response, the committee specifically asked Icahn to make “an actual acquisition proposal that the Board could evaluate” as opposed to merely offering the board a backup plan in case Michael Dell’s proposal fails to move forward.

“Please understand that unless we receive information that is responsive to our May 13 letter, we are not in a position to evaluate whether your proposal meets that standard,” the special committee reportedly wrote in response to Icahn’s request.

The question on Wall Street is the same as Dell’s: Is the Southeastern Asset Management offer serious? Icahn reportedly already owns 4.5 percent of Dell’s stock, while Southwest, already Dell’s largest outside shareholder, owns 8 percent.

Source: Reuters PEHub, “Dell Says Cannot Disclose More Information to Icahn Yet,” May 20, 2013; All Things D, "Dell’s Board Can’t Decide if Carl Icahn Is Serious," Arik Hesseldahl, May 20, 2013