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Icahn demands that Dell issue a $16bn dividend

Threatens lengthy legal action
Fri Mar 08 2013, 15:12
A Dell logo

CORPORATE RAIDER Carl Icahn has demanded that Dell pay a nearly $16bn ransom to buy him off ahead of a leveraged buyout.

Yesterday it was reported that legendary Wall Street investor Icahn had amassed a six percent stake in Dell as the firm tries to convince shareholders that its $24.4bn leveraged buyout is fair value for the company. Now Icahn has demanded that Dell pay a special dividend of $15.7bn, roughly equating to $9 a share and far higher than the $0.08 quarterly cash dividend approved by the firm yesterday.

If Dell knuckles under to his demands, Icahn will walk away with a cash windfall of about $942m, based on his six percent stake.

Icahn's letter to Dell's board of directors was nothing short of scathing in both its tone and demands. He wrote, "We see no reason that the future value of Dell should not accrue to ALL the existing Dell shareholders - not just Michael Dell."

Icahn's proposed special dividend would require the firm to raise $5.25bn in debt, and he warned that his offer should be accepted if Dell wants to avoid a proxy fight. Icahn is well known for his combative tactics once he owns a chunk of a company, and in his letter there was nothing to suggest that he has softened in his old age.

"If you fail to agree promptly to combine the vote [...] we anticipate years of litigation will follow challenging the transaction and the actions of the directors that participated in it," Icahn threatened.

Michael Dell's planned leveraged buyout would take the company private, with private equity firm Silver Lake Partners taking a significant holding and Microsoft providing a $2bn loan to grease the wheels. However it looks like Michael Dell might have to do a lot of negotiating before he'll be able to close his deal. µ

 

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