Investor Carl Icahn and Southeastern Asset Management have countered Dell's plan to go private with an offer that would give shareholders a large payout and still keep the computer company publicly traded.
In a letter Thursday to Dell's board, the two large shareholders in the company offered to give shareholders the option to continue holding shares in the company, and take an additional $12 a share in cash or stock.
Financing for the new proposal is to come from existing cash in Dell and $5.2 billion in new debt, making it similar to a "leveraged recapitalization" proposal Icahn and related entities made in March. In a leveraged recapitalization, a company typically takes on debt in order to pay a dividend to shareholders or repurchase its own shares.
Founder Michael Dell and private-equity firm Silver Lake Partners made an offer for Dell in February that aims to take the company private in a $24.4 billion deal. The proposal offers to pay $13.65 per share in cash.
The transaction proposed by Dell and Silver Lake involves more than $16 billion in debt, which is far more than the new debt suggested, which is backed by a bridge loan, according to the letter signed by Icahn and Southeastern President G. Staley Cates.
In March, Icahn proposed a leveraged recapitalization of Dell, and recommended the board announce to shareholders a special dividend of $9 per share in the event of the Dell-Silver Lake proposal being voted out. The dividend would be financed from existing cash, receivables and new debt.
The letter claims that the new proposal is superior to that of Michael Dell and Silver Lake, as shareholders can receive $12 in cash and still share in the future of Dell, an opportunity that is worth significantly more than the $1.65 per share extra in the Dell-Silver Lake offer.
Dell can make the transition from a maker of computers to a provider of services to enterprises, while remaining a public company, the investors maintained. They dismissed concerns about the PC business as being "somewhat cyclical" and said the PC is "far from an obsolete technology."
Icahn and Southeastern, who together hold 13 percent of Dell stock, also raised the possibility of changing Dell's board and management. "If this Board will not agree to our proposal, then we request that the Board announce that it will combine the vote on the Going Private Transaction with an annual meeting to elect a new board of directors," the letter said.
Another bidder, Blackstone Group, gave up its bid for Dell in April citing "an unprecedented 14 percent market decline in PC volume in the first quarter of 2013" and the company's eroding financial profile. "Since our bid submission, we learned that the company revised its operating income projections for the current year to $3.0 billion from $3.7 billion," it said. The offer had aimed to keep Dell publicly-traded, and offered investors the option to stay invested or sell their shares for more than $14.25 in cash per share.
IDC reported in April that PC shipments worldwide were at 76.3 million units in the first quarter, down 13.9 percent compared to the same period last year.
Blackstone and entities associated with Icahn presented proposals in the so-called "go-shop" period for alternative bidders to make their offers.
The investors have now threatened litigation if the special committee of Dell's board continues to prefer the Dell-Silver Lake offer, suggesting that the restructuring of Dell's ownership may not be settled soon.