Dell Special Committee Issues Letter to Stockholders

  Dell Special Committee Issues Letter to Stockholders

Business Wire

ROUND ROCK, Texas -- July 16, 2013

The Special Committee of the Board of Dell Inc. (NASDAQ: DELL) today issued
the following letter to stockholders:

Dear Stockholders:

We are writing to update you regarding our evaluation of the various leveraged
recapitalization transactions that Carl Icahn has proposed, including the most
recent version put forth at the end of last week, and to make some
observations about leveraged recapitalizations more broadly.

The basic concept that Mr. Icahn has proposed would be a $15.6 billion
self-tender by the Company at a price for each share actually purchased of
$14. Mr. Icahn and Southeastern Asset Management would agree not to tender any
of their shares. On Friday, Mr. Icahn proposed that the tender price would
also include, for each four shares purchased, one warrant to purchase an
additional share at a $20 strike price. If these transactions were consummated
and all stockholders other than Mr. Icahn and Southeastern tendered, each
stockholder would be required to retain approximately 29% of his or her shares
in the highly leveraged public company that would result, and would receive
for each share held approximately $9.99 in cash and 0.18 warrants.

We have reviewed with our financial and legal advisors the risks and rewards
of Mr. Icahn’s proposal, as well as the financing he has outlined for that
proposal.

At various points, Mr. Icahn has asked the Special Committee to declare the
transaction he has outlined a “Superior Proposal” under Dell’s existing merger
agreement or to withdraw our recommendation in favor of the Michael
Dell/Silver Lake merger. In fact, however, he has not constructed his proposal
in a manner that makes that possible or appropriate. First, the financing he
has proposed cannot be accepted by us – it is expressly conditioned on the
election to the Dell board of all 12 nominees of Icahn and Southeastern.
Second, while he has asked us either to abandon the Michael Dell/Silver Lake
merger agreement or to make a recommendation change that would permit Mr. Dell
and Silver Lake to terminate that agreement, Mr. Icahn’s proposal specifically
cautions that his transaction might never be completed and offers no remedies
in the event that he or his nominees or financing sources fail to consummate a
transaction. And third, he has identified neither a management team, nor a
strategic plan or vision, on the basis of which the Committee or anyone else
could evaluate the value of the “stub” equity he contemplates.

More broadly, based on analyses prepared by our advisors and our own view of
the business, we do not believe that Mr. Icahn’s proposal is superior to the
certainty of value offered by a sale of the entire Company at $13.65 per
share. The addition of warrants to Mr. Icahn’s concept has not meaningfully
altered the value equation: The warrants themselves would, according to the
analyses we have reviewed, be of modest value and that value would be offset
in part by their dilutive effect on the stub equity held by the recipient.
Further, on receipt, the entire value of the warrants would likely be taxable
to the holder. Finally, there is a fundamental illogic in ascribing meaningful
value to the transfer of a portion of any upside above $20 per share from
those who most believe in it (apparently Mr. Icahn and Southeastern) to those
who do not believe in it (the tendering stockholders who have sought to cash
out at $14 per share).

While for the foregoing reasons Mr. Icahn’s proposal does not provide the
basis for the Committee to change its recommendation, we are mindful of the
fact that the Board could independently resolve to consummate various
leveraged recapitalization transactions – including one along the lines
outlined by Mr. Icahn – with or without an agreement by certain shareholders
like Mr. Icahn and Southeastern to roll over their shares. Throughout its
thorough, multi-month review process, the Special Committee has carefully
considered the possibility of various recapitalization transactions. We have
reviewed sources of financing for such a transaction, the credit parameters of
the Company following a substantial dividend or stock repurchase, and the
liquidity and market implications of various potential approaches.

To summarize, while the Company’s strong balance sheet makes it possible to
borrow significant amounts, we consider it unwise to layer substantial
financial risk on a company already facing significant challenges from
competition and from the rapid pace of technological change. It is, we
believe, not an accident that no large publicly traded technology company
carries high levels of debt. And while we recognize that, as a private company
controlled by Mr. Dell and Silver Lake, the Company will have a significant
debt burden, the risks of that capital structure will be borne entirely by the
buyers and not by the public stockholders. Moreover, the buyers have the
financial resources to invest additional funds if that proves necessary.

Conversely, a leveraged recapitalization of the sort advocated by Mr. Icahn
would force Dell stockholders to maintain meaningful equity exposure to a
non-investment grade, publicly traded company that we believe would likely be
ill-prepared to weather further downturns in the PC business and could be
hamstrung in its ability to make the additional investments needed to complete
its transformational plan. We believe such a company would face instability
that would undermine customer confidence and make it harder to attract and
retain the best employees.

We have also evaluated alternative recapitalization transactions that involve
a stronger balance sheet and more modest returns of capital. These would not
pose the same risk to Dell’s future, but, in our view, they also would not
fundamentally create value. Accordingly, we concluded, and we continue to
believe, that a sale at a premium remains a superior option to a leveraged
recapitalization.

In closing, we wish to note that it is unfortunate Mr. Icahn continues to
conduct his campaign by trying to discredit the Special Committee and accuse
it of frightening Dell stockholders. Such accusations do a disservice to all
of you. The Committee has studied a complicated situation with great care,
balanced risks and rewards in a dispassionate manner and concluded the
transaction you are being asked to vote for on July 18th is in the best
interests of stockholders. It would be irresponsible if we did not share with
all stockholders the reasons for our conclusions.

In addition, we have taken extraordinary measures to ensure Mr. Dell’s
neutrality and to leave the final decision with the disinterested
stockholders. And for many months now, any party, including Mr. Icahn and
Southeastern, has had and continues to have the opportunity to purchase the
Company at a price higher than $13.65 a share. No such party has emerged.

We appreciate that different stockholders may have different views about the
alternatives facing the Company or different appetites for business and
financial risk. We encourage an open debate about these matters. But we urge
you to base your decision on the facts and not be misled by Mr. Icahn’s
self-serving accusations.

The Special Committee has had only one goal from the beginning – and that is
to maximize value for stockholders, however that goal is best achieved. We
have studied the options very carefully and our conclusion, which has been
supported by all of the leading proxy advisory services, is that a sale
transaction at a substantial and certain premium is the best way forward. That
is why we urge you to vote the WHITE card promptly by telephone or internet in
support of receiving $13.65 per share in cash, and to be sure your vote is
received in time to be counted at Dell’s Special Meeting to be held on
Thursday, July 18, 2013 at 8:00 a.m. CDT.

Shareholders who have any questions, require assistance in voting the WHITE
proxy card, or need additional copies of Dell’s proxy materials are encouraged
to contact MacKenzie Partners toll-free at (800) 322-2885, or via email at
Dell@mackenziepartners.com.

Sincerely,

Alex J. Mandl
Janet F. Clark
Laura Conigliaro
Kenneth M. Duberstein

THE SPECIAL COMMITTEE OF THE
BOARD OF DIRECTORS OF DELL INC.

Forward-looking Statements

Any statements in these materials about prospective performance and plans for
the Company, the expected timing of the completion of the proposed merger and
the ability to complete the proposed merger, and other statements containing
the words “estimates,” “believes,” “anticipates,” “plans,” “expects,” “will,”
and similar expressions, other than historical facts, constitute
forward-looking statements within the meaning of the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Factors or risks that
could cause our actual results to differ materially from the results we
anticipate include, but are not limited to: (1)the occurrence of any event,
change or other circumstances that could give rise to the termination of the
merger agreement; (2)the inability to complete the proposed merger due to the
failure to obtain stockholder approval for the proposed merger or the failure
to satisfy other conditions to completion of the proposed merger, including
that a governmental entity may prohibit, delay or refuse to grant approval for
the consummation of the transaction; (3)the failure to obtain the necessary
financing arrangements set forth in the debt and equity commitment letters
delivered pursuant to the merger agreement; (4)risks related to disruption of
management’s attention from the Company’s ongoing business operations due to
the transaction; and (5)the effect of the announcement of the proposed merger
on the Company’s relationships with its customers, operating results and
business generally.

Actual results may differ materially from those indicated by such
forward-looking statements. In addition, the forward-looking statements
included in the materials represent our views as of the date hereof. We
anticipate that subsequent events and developments will cause our views to
change. However, while we may elect to update these forward-looking statements
at some point in the future, we specifically disclaim any obligation to do so.
These forward-looking statements should not be relied upon as representing our
views as of any date subsequent to the date hereof. Additional factors that
may cause results to differ materially from those described in the
forward-looking statements are set forth in the Company’s Annual Report on
Form 10–K for the fiscal year ended February 1, 2013, which was filed with the
SEC on March 12, 2013, under the heading “Item 1A—Risk Factors,” and in
subsequent reports on Forms 10–Q and 8–K filed with the SEC by the Company.

Additional Information and Where to Find It

In connection with the proposed merger transaction, the Company filed with the
SEC a definitive proxy statement and other relevant documents, including a
form of proxy card, on May 31, 2013. The definitive proxy statement and a form
of proxy have been mailed to the Company’s stockholders. Stockholders are
urged to read the proxy statement and any other documents filed with the SEC
in connection with the proposed merger or incorporated by reference in the
proxy statement because they contain important information about the proposed
merger.

Investors will be able to obtain a free copy of documents filed with the SEC
at the SEC’s website at http://www.sec.gov. In addition, investors may obtain
a free copy of the Company’s filings with the SEC from the Company’s website
at http://content.dell.com/us/en/corp/investor-financial-reporting.aspx or by
directing a request to: Dell Inc. One Dell Way, Round Rock, Texas 78682, Attn:
Investor Relations, (512) 728-7800, investor_relations@dell.com.

The Company and its directors, executive officers and certain other members of
management and employees of the Company may be deemed “participants” in the
solicitation of proxies from stockholders of the Company in favor of the
proposed merger. Information regarding the persons who may, under the rules of
the SEC, be considered participants in the solicitation of the stockholders of
the Company in connection with the proposed merger, and their direct or
indirect interests, by security holdings or otherwise, which may be different
from those of the Company’s stockholders generally, is set forth in the
definitive proxy statement and the other relevant documents filed with the
SEC. You can find information about the Company’s executive officers and
directors in its Annual Report on Form 10-K for the fiscal year ended February
1, 2013 (as amended with the filing of a Form 10-K/A on June3, 2013
containing Part III information) and in its definitive proxy statement filed
with the SEC on Schedule 14A on May 24, 2012.

About Dell

Dell Inc. (NASDAQ: DELL) listens to customers and delivers worldwide
innovative technology, business solutions and services they trust and value.
For more information, visit www.Dell.com. You may follow the Dell Investor
Relations Twitter account at: http://twitter.com/Dellshares. To communicate
directly with Dell, go to www.Dell.com/Dellshares.

Contact:

Media Contacts for the Special Committee:
Sard Verbinnen & Co
George Sard/Paul Verbinnen/Jim Barron/Matt Benson
212-687-8080
 
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