Icahn’s Chosen Lender Jefferies Sees Rival Dell Bid Favored

May 10 (Bloomberg) -- Billionaire investor Carl Icahn talks about his alternative offer for Dell Inc. that could enable investors to keep their stakes in the company. Icahn is seeking to upend a $24.4 billion buyout of Dell by its founder, Michael Dell, and Silver Lake Management LLC. He speaks with Trish Regan on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

Jefferies Group LLC (JEF), the investment bank that Carl Icahn says may help finance his takeover bid for Dell Inc. (DELL), told clients in a research report that the computer company’s investors are more likely to favor a competing offer.

“Most shareholders would prefer the certainty of $13.65 in cash” from Michael Dell and Silver Lake Management LLC, Peter Misek, an analyst at New York-based Jefferies, wrote in a note today. Investors may accept that rather “than risk the uncertainty and the ensuing stock volatility if the Silver Lake proposal were voted down and Icahn/Southeastern attempt to install a new board of directors.”

Under Icahn’s plan with Southeastern Asset Management Inc., Dell shareholders would be able to choose between a $12-a-share cash distribution or $12 in additional shares valued at $1.65 apiece, according to a letter included in a May 10 filing. That deal would require a $5.2 billion bridge loan, for which Jefferies “has pretty much committed” $1.6 billion, Icahn said that day on Bloomberg Television.

“Our estimates point to possible minimal upside (i.e., only $0.30) to the $13.65 Silver Lake offer, which we do not think would warrant the potential volatility,” Misek wrote. Still, Icahn’s offer “adds some pressure on Silver Lake to raise its bid.”

Photographer: Scott Eells/Bloomberg

Under Icahn Enterprises Holdings LP Chairman Carl Icahn’s plan with Southeastern Asset Management Inc., Dell Inc. shareholders will be able to choose between a $12-a-share cash distribution or $12 in additional shares valued at $1.65 apiece, according to a letter included in a May 10 filing. Close

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Photographer: Scott Eells/Bloomberg

Under Icahn Enterprises Holdings LP Chairman Carl Icahn’s plan with Southeastern Asset Management Inc., Dell Inc. shareholders will be able to choose between a $12-a-share cash distribution or $12 in additional shares valued at $1.65 apiece, according to a letter included in a May 10 filing.

The offer from Silver Lake and Michael Dell would take the company private, while Icahn’s would leave it traded publicly.

Chinese Walls

Richard Khaleel, a Jefferies spokesman, declined to comment on the analyst note or whether the firm has committed funding. Icahn didn’t return a telephone call seeking comment.

Wall Street brokerages typically have so-called Chinese Walls intended to separate research from other dealings. Jefferies handles trades involving Dell’s securities, according to the section of the note titled “company-specific disclosures,” which didn’t indicate whether the investment bank may finance Icahn’s offer.

“It looks like the equity analyst is doing his job to be objective,” said Jim Angel, visiting professor at the University of Pennsylvania’s Wharton School. “That’s the kind of thing that makes a firm like Jefferies have even more credibility in a situation like this.”

Jefferies does business with companies covered in its research reports, according to the note. “As a result, investors should be aware that Jefferies may have a conflict of interest that could affect the objectivity of this report.”

To contact the reporter on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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