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Icahn Reviewing Dell Books Amid Mounting LBO Opposition

Billionaire Investor Carl Icahn
Billionaire investor Carl Icahn said last week that he asked Dell Inc.’s board to pledge that it will implement his dividend proposal if shareholders reject the Michael Dell-led offer. Photographer: Scott Eells/Bloomberg

Billionaire Carl Icahn is reviewing Dell Inc.’s books as he pushes alternatives to a proposed $24.4 billion leveraged buyout of the personal computer maker that faces mounting resistance from investors.

Icahn, who has amassed a stake in Dell and is urging the company to pay a special dividend of $9 a share, said in a statement today that he signed a confidentiality agreement with Dell to examine information, without providing additional detail. David Frink, a spokesman for Dell, declined to comment beyond the public filing, and representatives for Icahn and didn’t respond to requests for comment.

Dell’s board is seeking bids higher than the $13.65 a share offer by Chief Executive Officer Michael Dell and Silver Lake Management LLC to take the company private. The deal -- which requires approval from a majority of shareholders excluding CEO Dell -- has been opposed by shareholders including Southeastern Asset Management Inc. and T. Rowe Price Group Inc., who have said the price undervalues the company.

Icahn’s signing of a confidentiality agreement shows his intention to stay involved in the transaction until he’s guaranteed a profit, said Anthony Michael Sabino, a professor at John’s University’s Peter J. Tobin College of Business. He may attempt his own takeover or support a third-party bidder.

Go-Shop Period

“This opens up a host of possibilities,” Sabino said in an interview. “Dell is fully in play.”

Icahn said last week that he asked Dell’s board to pledge that it will implement his dividend proposal if shareholders reject the Michael Dell-led offer. Otherwise, Icahn said he will start a proxy fight and seek to replace directors of the Round Rock, Texas-based company with his own candidates.

The so-called go-shop period for the company to seek higher bids runs through March 22, and Dell said last week that it welcomes Icahn and other parties to participate in that process.

By reviewing Dell’s records, Icahn ratchets up pressure on Michael Dell to raise his bid, according to Erik Gordon, a business and law professor at the Stephen M. Ross School of Business at the University of Michigan in Ann Arbor.

“It puts Icahn closer to being able to make a competing bid, and it probably would cost Michael more to top an Icahn bid than it would cost him to raise his own offer just enough to get some of the big investors to support it,” Gordon said in an e-mailed statement.

Dell rose 1.5 percent to $14.37 at the close in New York, signaling that investors anticipate a higher buyout offer. The stock has advanced 42 percent this year, compared with a 9.1 percent gain for the Standard & Poor’s 500 Index.

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