The Special Committee of the Board of Dell Inc. (NASDAQ: DELL) today issued the following letter to stockholders:
We are writing to update you regarding our evaluation of the various leveraged recapitalization transactions that Carl Icahn has proposed, including the most recent version put forth at the end of last week, and to make some observations about leveraged recapitalizations more broadly.
The basic concept that Mr. Icahn has proposed would be a $15.6 billion self-tender by the Company at a price for each share actually purchased of $14. Mr. Icahn and Southeastern Asset Management would agree not to tender any of their shares. On Friday, Mr. Icahn proposed that the tender price would also include, for each four shares purchased, one warrant to purchase an additional share at a $20 strike price. If these transactions were consummated and all stockholders other than Mr. Icahn and Southeastern tendered, each stockholder would be required to retain approximately 29% of his or her shares in the highly leveraged public company that would result, and would receive for each share held approximately $9.99 in cash and 0.18 warrants.
We have reviewed with our financial and legal advisors the risks and rewards of Mr. Icahn’s proposal, as well as the financing he has outlined for that proposal.
At various points, Mr. Icahn has asked the Special Committee to declare the transaction he has outlined a “Superior Proposal” under Dell’s existing merger agreement or to withdraw our recommendation in favor of the Michael Dell/Silver Lake merger. In fact, however, he has not constructed his proposal in a manner that makes that possible or appropriate. First, the financing he has proposed cannot be accepted by us – it is expressly conditioned on the election to the Dell board of all 12 nominees of Icahn and Southeastern. Second, while he has asked us either to abandon the Michael Dell/Silver Lake merger agreement or to make a recommendation change that would permit Mr. Dell and Silver Lake to terminate that agreement, Mr. Icahn’s proposal specifically cautions that his transaction might never be completed and offers no remedies in the event that he or his nominees or financing sources fail to consummate a transaction. And third, he has identified neither a management team, nor a strategic plan or vision, on the basis of which the Committee or anyone else could evaluate the value of the “stub” equity he contemplates.