Icahn has called Dell's takeover "the great giveaway" and sees significant value in returning the company's cash stockpile to shareholders and giving investors a leveraged stake in the company's potential turnaround or breakup. The activist has indicated to the media he expects Microsoft ( MSFT) or Hewlett-Packard ( HPQ) could buy Dell's declining PC unit, as he tries to extract value from a burgeoning enterprise division. In recent earnings, Dell's reported showed steep earnings declines due to weak PC-unit sales, however, the company's earnings were bolstered by rising performance of software and services businesses. Still, Icahn was not able to provide specifics on how he would finance his proposed $12 a share dividend, and his efforts have yet to amount to a fully financed, formal offer for Dell's board of directors to consider. After Dell accepted a $24.4 billion offer from the Silver Lake and Michael Dell consortium in February, the company formed a special committee to seek higher takeover bids, receiving proposals from Icahn and private equity giant Blackstone Group ( BX). However, the leveraged recapitalization of Dell remains the only alternative to the initial full takeover bid, as a key shareholder vote approaches.
Icahn and Southeastern hold about 13% of Dell's outstanding shares and expect at least 20% of Dell shareholders to take Dell shares instead of the stock dividend. According to the proposal, investors opting for Dell shares over the dividend would get about 7.3 Dell shares priced at $1.65 for each current share.