Open Letter To Dell Stockholders And Dell Special Committee
NEW YORK, July 1, 2013
NEW YORK, July 1, 2013 /PRNewswire/ --Carl Icahn and his affiliates today
issued the following letter to stockholders of Dell Inc. and members of the
Dell Special Committee.
Dear Fellow Dell Stockholders AND Members of the Dell Special Committee:
$5.2 BILLION COMMITTED
We are pleased to inform you that we have obtained lendercommitments for the
$5.2 billion in debt financingthatwe said we wouldobtain (including $1.6
billion from Jefferies Finance LLC). Jefferies has advised us that they are
completing the paperwork and the commitment letters will be publicly
filedafter the market closetoday.With that we put an end to the
unwarranted speculation byDell that our money would not beavailable.
OUR $14 DOLLARDELL SELF TENDERPROPOSAL
With the $5.2 billion incommitted debt financing, $7.5 billionfrom cash on
the Dell balance sheet and $2.9billionto be derived from thesale of
receivables, Dell will have the aggregate $15.6 billionnecessary to
conductour proposedselftenderby Dellfor approximately 1.1
billionDellshares at $14 per share(the "$14 Tender Offer"). Following
completion of the $14 Tender OfferDell willhaveapproximately$4.9
billionof cash remaining. Also,our lendercommitments permit an additional
$1.5 billion revolverfor Dell shouldthat becomenecessary.
Icahn and SoutheasternAsset Managementhave agreed not to tenderintothe $14
Tender Offer. Therefore, even ifthe $14TenderOffer isfully subscribed,
stockholderswillreceive $14 per share for at leastapproximately 72% of
their Dell stock--andanevenhigher percentage if other stockholders
believe, like us, that Dell's best days are ahead of itanddecide tohold
onto their Dell shares.
If the$14 Tender Offer is fully subscribed, 670 million shares would remain
outstanding. Based on the fiscal year 2015 BCG Base Case as set forth in
Dell's Proxy Statement* (andeven withouttaking into account the cost
reductionopportunitiesidentified by BCG), we believe the earnings per share
for those remaining shares would be $3.72 per share. Assuming75% of BCG's
productivity cost reductions set forth in Dell's Proxy Statement are attained,
earnings per share for those remaining shares would be as high as $5.51 per
share. In other words, in our proposal tendering stockholders would receive
$14 per share for at least 72% of their shares and, based on this BCG
analysis, their remaining shares would be earning between $3.72 and as high as
$5.51 per share. We therefore believe that it is self-evident our proposal is
far superior to the $13.65 offered by MichaelDell/ Silver Lake.**
Dell stockholders shouldnote that, despiteDell's recent drumbeat of rapid
deterioration, the recentlyreported performance in 1QFY14 and management's
operational decisions particularly regarding PC pricing,Dellhas not
retracted its Final Fiscal Year 2014 Board Case EBITDA of $3.6 billion(as
disclosed in the Dell Proxy Statement),nor any of the projected BCG cases for
fiscal years 2014 to 2017. Further, based on statements by Dell's management,
we believe that Dell'srecent aggressive PC pricingdiscounts aredesigned to
buy meaningful market share while sacrificing near-term margins – a strategy
that we believe will benefit future owners. Senior management, including
Brian Gladden, CFO,and Tom Sweet, VP Corporate Finance,both highlighted this
fact on the Q1'14 earningscall:
"In many cases, these are accounts that we feel very good about [with respect
to] thelong-termprofitability and the impact on our cash flow over time. So
while we may not see that showing up as a positive in the P&L in the short
term, we think for thelongtermit's the right thing to do to get ourselves
back in price position to scale the business," as per Brian Gladden.
"We are investing and acquiring new customer accounts that will benefit our
long-termprofitability and cash flow," as per Tom Sweet.
We therefore can only ask, based on these statements by management and the BCG
analysis mentioned above, why is the Board recommending a "freeze-out"
transaction that denies stockholders the right, if they so choose, to
participate in the "long term" potential upside that Dell management
themselves see for Dell.
A MESSAGE TO THE DELL SPECIAL COMMITTEE
Now that our financing iscommitted andin place, we calluponthe Dell
Special Committee to engage in a direct,face to facesit downmeeting with us
(not through its highly paidadvisors as has occurred in the past). As
always,it is our desirethat our proposalbe treated as a Superior Proposal
madeby an Excluded Person under the Merger Agreement,and thereby save
stockholders $270millionin additional break-up feesthat may otherwise be
claimed bySilver Lake.
It is mystifying to us how any independent Board which is charged with duties
as fiduciaries can recommend to shareholders a $13.65 per share "freeze-out"
merger with Michael Dell/Silver Lake as superior to a proposal that provides
stockholder the choice toreceive $14 per share for at least 72% of their
shares and, based on their own projections and on the BCG analysis mentioned
above, to own their remaining shares earning between $3.72 and as high as
$5.51 per share. Webelieve that it would be a sad outcome for stockholders
and would, to say the least, reflect terribly on all who are involved in this
process if, after purchasing shares at what we perceive to be a substantially
undervalued price of $13.65 per share, Michael Dell and Silver Lake earned
substantial returns on their investment while other stockholders are forced to
sell. It would be even worse if Dell were sold (or broken up) by Michael Dell
and Silver Lake in a transaction or transactions with one or more strategic
acquirers for a very large profit.
We therefore ask the Board to find our proposal to be a "Superior Proposal" or
at the very least to change its recommendation regarding the Michael
Dell/Silver Lake transaction
We look forward to hearing your answer in the very near future.
Carl C. Icahn
Icahn Enterprises, L.P.
If you have any questions concerning the Proxy Statement or would like
additional copies, please contact D.F. King & Co., Inc. at 1-800-347-4750 or
* For detailed information relating to the BCG cases, please see Dell's
Definitive Proxy Statement, filed with the Securities and Exchange Commission
on May 30, 2013.
** The $14 Tender Offer is subject to a number of contingencies. First, the
$14 Tender Offer would require that Dell stockholders defeat the Michael
Dell/Silver Lake merger at the special meeting scheduled to be held on July
18, 2013 (the "Special Meeting"). Second, Dell stockholders would need to
elect a Board that is willing to pursue the $14 Tender Offer transaction. As
discussed in the Icahn/Southeastern Definitive Proxy Statement, filed with the
Securities and Exchange Commission on June 26, 2013, Icahn and Longleaf
Partners Fund have notified Dell that they intend to nominate six Icahn
nominees and six Longleaf Partners Fund nominees, respectively, for election
to the Dell Board at the 2013 Annual Meeting of Stockholders. Finally, the
Dell Board would then need to approve the $14 Tender Offer transaction after
reviewing it consistent with their fiduciary duties as directors, as well as
cause Dell to have the financing for the $14 Tender Offer. While we believe
these director nominees (or a majority thereof), if elected, will approve the
$14 Tender Offer, there can be no assurance that the $14 Tender Offer
transaction will occur, even if Dell stockholders defeat the Michael
Dell/Silver Lake merger at the Special Meeting and even if some or all of the
Icahn nominees and the Longleaf Partners Fund nominees are elected to the
NOTICE TO INVESTORS
SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT, DATED JUNE 26, 2013,
AND OTHER DOCUMENTS RELATED TO THE SOLICITATION OF PROXIES BY ICAHN
ENTERPRISES, LP, SOUTHEASTERN ASSET MANAGEMENT, INC. AND THEIR RESPECTIVE
AFFILIATES FROM THE STOCKHOLDERS OF DELL INC. FOR USE AT DELL INC.'S SPECIAL
MEETING OF STOCKHOLDERS SCHEDULED TO BE HELD ON JULY 18, 2013 BECAUSE THEY
CONTAIN IMPORTANT INFORMATION, INCLUDING INFORMATION RELATING TO THE
PARTICIPANTS IN SUCH PROXY SOLICITATION. A DEFINITIVE PROXY STATEMENT AND A
FORM OF PROXY HAVE BEEN MAILED TO STOCKHOLDERS OF DELL INC. AND ARE ALSO
AVAILABLE AT NO CHARGE AT THE SECURITIES AND EXCHANGE COMMISSION'S WEBSITE AT
HTTP://WWW.SEC.GOV. INFORMATION RELATING TO THE PARTICIPANTS IN SUCH PROXY
SOLICITATION IS CONTAINED IN THE DEFINITIVE PROXY STATEMENT, DATED JUNE 26,
2013. EXCEPT AS OTHERWISE DISCLOSED IN THE DEFINITIVE PROXY STATEMENT, THE
PARTICIPANTS HAVE NO INTEREST IN DELL INC. OTHER THAN THROUGH THE BENEFICIAL
OWNERSHIP OF SHARES OF COMMON STOCK OF DELL INC. AS DISCLOSED IN THE
DEFINITIVE PROXY STATEMENT. We have not sought, nor have we received,
permission from any third party to include their information in this letter.
Certain statements contained in this letter, and the documents referred to in
this letter, are forward-looking statements including, but not limited to,
statements that are predications of or indicate future events, trends, plans
or objectives. Undue reliance should not be placed on such statements
because, by their nature, they are subject to known and unknown risks and
uncertainties. Forward-looking statements are not guarantees of future
performance or activities and are subject to many risks and uncertainties.
Due to such risks and uncertainties, actual events or results or actual
performance may differ materially from those reflected or contemplated in such
forward-looking statements. Forward-looking statements can be identified by
the use of the future tense or other forward-looking words such as "believe,"
"expect," "anticipate," "intend," "plan," "estimate," "should," "may," "will,"
"objective," "projection," "forecast," "management believes," "continue,"
"strategy," "position" or the negative of those terms or other variations of
them or by comparable terminology.
Important factors that could cause actual results to differ materially from
the expectations set forth in this letter include, among other things, the
factors identified under the section entitled "Risk Factors" in Dell's Annual
Report on Form 10-K for the year ended February 1, 2013 and under the section
entitled "Cautionary Statement Concerning Forward-Looking Information" in
Dell's Definitive Proxy Statement filed with the SEC on May 31, 2013. Such
forward-looking statements should therefore be construed in light of such
factors, and Icahn and Southeastern are under no obligation, and expressly
disclaim any intention or obligation, to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise, except as required by law.
SOURCE Carl C. Icahn
Contact: Susan Gordon, (212) 702-4309
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