Icahn Gives Dell Share Buyback Offer


There has been a development in the battle over Dell Inc. (DELL) between Michael Dell and Carl Icahn. The Dell Special Committee has received a fresh proposal from the billionaire investor, wherein he suggested that Dell shareholders sell all their shares to Dell for a sum totalling $16 billion.

This is a fresh move made by Icahn. In a month’s time, Dell shareholders will vote for or against the $24.4 billion ($13.65 a share) bid made by Michael Dell and private equity firm Silver Lake; Icahn needs to act before that.

Icahn is campaigning against the offer made by Michael Dell, saying that the shares were being undervalued. Some newly appointed directors would  bring about a more favorable outcome for shareholders. The new board would approve of Dell buying back shares at the rate of $14 a share, higher than the current bidding price of $13.65 offered by Dell and Silver Lake.

Previously, in March, after Dell announced its intention to go private, Icahn offered a counter bid. While Icahn offered to pay the investors $12 a share in cash or stock, he also allowed the shareholders to hold to their share of the company. After evaluating the deal, Dell’s board came to the conclusion that Icahn’s offer would result in a $3.9 billion funding gap, reducing the dividend figure to $10 a share from $12 per share, which in turn would give rise to liquidity issues for the company.

Dell’s attempt to go private is seeing a number of challenges with Michael Dell – Carl Icahn conflicts, resulting in significant delays and uncertainties. However, the possibility of a higher return to shareholders has kept prices buoyant.

Dell has been hard-hit by the slowdown in the PC market. Moreover, the company is up against cutthroat competition, low business growth in Europe and a restricted spending environment. The competition faced by the company in the Small & Medium Business (SMB) and server segments is also a concern. This is the main reason that founder Michael Dell sought to reinvent the company.

Dell carries a Zacks Rank #5 (Strong Sell).

Investors can consider other stocks in the technology space such as Pegasystems Inc. (PEGA) or SAP AG (SAP), both of which carry a Zacks Rank #1 (Strong Buy) and Progress Software (PRGS), carrying a Zacks Rank #2 (Buy).

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