As the time for a shareholder vote draws near, the Dell special committee weighing competing bids for the company said that a plan from investor Carl Icahn and Southeastern Asset Management comes up short by billions of dollars.
The Dell committee reiterated that an offer from company founder Michael Dell and Silver Lake Partners is superior. The remarks were made in a presentation with the US Securities and Exchange Commission.
In February, Dell announced that Michael Dell was teaming up with Silver Lake to buy the company, offering $13.65 per share. The deal is being financed through cash and equity contributed by Dell, cash from investors affiliated with Silver Lake, and a $2 billion loan from Microsoft, as well as other debt financing.
Dell is betting that as a private company operating outside the scrutiny of Wall Street, it will be better able to execute its strategy to push into high-margin products and services.
Icahn and Southeastern, which together hold 12% of Dell stock, last month offered up a plan that would give shareholders a payout while keeping the company publicly traded. The two investors offered to give shareholders the option to continue holding shares in the company, and take an additional $12 a share in cash or stock in a special dividend plan.
Financing for the new proposal was to come from existing cash in Dell and $5.2 billion in new debt, making it similar to a "leveraged recapitalisation" proposal Icahn and other entities made in March. In a leveraged recapitalisation, a company typically takes on debt in order to pay a dividend to shareholders or repurchase its own shares.
But in its presentation to the SEC, Dell lays out a calculation that Icahn and Southeastern's plan does not accurately account for debt payments the company must make, as well as cash needed for ongoing operations. Rather than the $17.3 billion in cash that Icahn and Southeastern calculates would be available for their plan, only $13.4 billion could be used, Dell said.
A a result, according to the presentation, the company would potentially be $3.9 billion short if it tried to go ahead with the dividend payout.
The presentation is essentially a reiteration, laid out in more precise form to the SEC, of comments it made last month.
The company expects to hold a shareholder vote on the go-private plan next month.