Michael Dell, owner of
) seems to have won half the battle against business tycoon, Carl
Icahn. Icahn's proposed bid to derail Michael Dell's LBO is
losing steam with proxy shareholder advisory firm, Institutional
Shareholder Services Inc. (ISS) recommending the original buyout
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Yesterday, Dell's Special Committee announced the receipt of ISS'
statement recommending Dell shareholders to vote for the $24.4
billion LBO offer (which comes to $13.65 per outstanding share)
from owner Michael Dell. ISS' recommendation reflects the best
interests of the shareholders.
ISS' recommendation comes with the support of two other advisory
firms, namely Glass Lewis and Egan-Jones, both of which conveyed
their independent decisions based on an exhaustive review of
Dell's existing business plans and various alternatives. The
decision of the advisory firms is in tandem as they believe that
shareholders will benefit out of the deal and will not face the
repercussions of the continuous slowdown in the PC business.
As expected, Carl Icahn and his partner Southeastern Asset
Management expressed their disappointment over the ISS'
statement, asserting that their offer will be honoring the best
possible interests of the shareholders.
Carl Icahn still believes that his offer to buy 1.1 billion
shares at a price of $14 a share (total value of the deal being
$15.4 billion) would give shareholders a good return in addition
to continued earnings from a publicly-traded Dell.
Michael Dell, his LBO partner Silver Lake and the Special
Committee (formed by Dell's board of directors to oversee the
matter on behalf of the shareholders) turned down Icahn's
proposal citing concerns regarding the availability of funds and
possible pressure on the company's liquidity.
Icahn made another attempt with a promise to fund $5.2
billion (comprising two term loans) over and above $7.5 billion
cash and $2.9 billion from sales of receivables. Moreover, Icahn
also proposed to arrange for an additional $2.0 billion (through
its associates), if necessary. The arrangement would leave enough
cash with Dell to maintain liquidity and smoothly run operations,
even after returning cash to shareholders.
Michael Dell and Silver Lake, however, declined to comment or
express their willingness to further "sweeten" the deal (i.e.
offering $14.0 per share instead of the existing $13.65 a share).
While Dell has received ISS' approval, it still needs a majority
vote to complete the buyout process. The shareholder vote, which
will be the deciding factor, is scheduled on Jul 18.
There is a possibility that the shareholders might demand the
higher price before they approve the deal. So the ball is in
Michael Dell's court and it will be interesting to see what he
Currently, Dell has a Zacks Rank #5 (Strong Sell), reflecting the
pending LBO. Investors could, however, consider technology stocks
Micron Technology Inc.
), which have a Zacks Rank #2 (Buy) and are worth investing