Icahn demands Dell pay $16 billion dividend to avert fight

Thu Mar 7, 2013 5:41pm EST
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By Sruthi Ramakrishnan

(Reuters) - Activist investor Carl Icahn is demanding Dell Inc pay out $15.7 billion in special dividends, joining a growing chorus of opposition to founder Michael Dell's plan to take the world's No. 3 personal computer maker private.

The billionaire investor, whose arrival on the scene typically puts companies on guard, wants the PC maker to pay $9 a share in dividends immediately from its own cash and from raising new debt.

Icahn, who has a reputation for demanding aggressive changes after amassing stakes in companies, argued in a letter to the company's board published on Thursday that Michael Dell's and Silver Lake's proposed $24.4 billion buyout short-changed shareholders, undervalued the company and benefited mainly the company co-founder himself.

"We see no reason that the future value of Dell should not accrue to ALL the existing Dell shareholders - not just Michael Dell," Icahn wrote in the letter, which Dell disclosed in a filing.

Icahn's proposed special dividend of $9 per share would include $4.26 a share derived from $5.25 billion in new debt.

He argued that, combined with a "stub" value of $13.81 per share that his firm calculated based on discounted cash flow, such a move would deliver shareholders a total value of $22.81 per share.

That would be a 67 percent premium to the $13.65 buyout price put forward by Michael Dell in partnership with private equity house Silver Lake and Microsoft Corp.

In his letter, Icahn asked Dell's board to commit to his proposal to "avoid a proxy fight." He also wants Dell to combine an upcoming special shareholder vote on the buyout deal with its regular annual general meeting, when Icahn said he intended to put forward a slate of his own directors for election to the board.   Continued...

A Dell computer logo is seen on a laptop at Best Buy in Phoenix, Arizona, February 18, 2010. REUTERS/Joshua Lott