Dell Says Icahn’s Offer Based on ‘Unrealistic Multiples’

Dell Inc. said Carl Icahn’s tender offer gives the personal-computer maker a valuation more than twice that of its closest peer, Hewlett-Packard Co., and isn’t based on a concrete cost-savings plan.

Dell’s special committee, which has criticized the proposal previously, provided additional arguments for its case in a filing today as Institutional Shareholder Services prepares to make a recommendation to shareholders on founder Michael Dell’s buyout proposal. The investor advisory firm is leaning against the deal, people familiar with the matter said this week.

The offer by Icahn and partner Southeastern Asset Management Inc. implies “unrealistic multiples,” valuing Dell at 12 times earnings before interest, taxes, depreciation and amortization, compared with 4.6 times for Hewlett-Packard, Round Rock, Texas-based Dell said in the filing. Many of the categories of costs savings in the offer weren’t specifically identified, it said.

The odds have been mounting against Michael Dell’s $24.4 billion bid to take Dell private. A negative recommendation by ISS would increase the likelihood that investors will oppose the proposal -- unless the founder and his partners sweeten the $13.65-a-share bid, people familiar with the talks have said.

In the filing today, Dell said there’s a “substantial downside risk” to shareholders if they reject Michael Dell’s transaction. The $13.65-a-share offer implies a premium to Dell shares, based on Hewlett-Packard multiples, according to the filing.

Michael Dell expects the stock to fall to about $7.90 a share, based on trailing earnings, if the LBO is voted down, according to a person with direct knowledge of his thinking.

Dell fell 2 percent to $13.04 at 10:09 a.m. New York time.

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