Sense of the Markets: Icahn and Founder Go Dutch on Dell

NEW YORK (TheStreet) -- Some of us are old enough to remember that Web 1.0 feeling, when we saw, from far off, that enormous brown (or, conversely, Holstein cow-colored) box almost too big to fit on the doorstep, signifying one, and only one thing — your late 1990s PC has arrived.

And even as the industry is going through double-digit declines in PC consumption, Michael Dell likely has that excited feeling, too. Despite Carl Icahn's attempt to buy the PC maker and even his insistence that he has sufficient financing to compete, the corporate raider may ultimately be content using his position to try and wring a few more pennies out of Dell's ( DELL) founder.

Perhaps this was why Icahn was eager to break bread with Michael Dell, according to CNBC, at a meeting roughly two weeks ago (one source said there currently are no more scheduled talks for the two). For someone who once threatened to cast aside the company founder, the activist investor's tune appears to have changed.

After struggling to quickly assemble a financing package and being repeatedly rebuffed by the PC maker's special committee, in the middle of June Icahn said Dell's founder and his private equity partners should bump their offer up to $14 per share. Of course, this was after Icahn partner Southeastern Asset Management Inc. had all but waved the white flag, and sold its shares to Icahn for less than $14 each.

It will be difficult to determine whether or not Icahn's proposal is actually superior — Dell's special committee hasn't received anything official from Icahn regarding his financing pitch. And don't expect Dell's special committee to sign off on Icahn's pitch — given the complicated nature of the way Icahn is going about his proposal, that could open up a can of worms over what truly is a superior offer, with Silver Lake Partners LP's entitlement to a breakup fee in excess of a quarter-billion dollars on the line.

Of course, if the special committee were to determine Icahn's bid superior, Silver Lake could always come back with a penny or so more bid.

After practically being goaded by Dell's special committee — which he, himself, sought to antagonize via aggressive shareholder letters — Icahn did, in fact, put his money where his mouth is.

But it isn't even clear if Icahn could have held his end of the bargain up by traditional means; according to a regulatory filing made Tuesday, Jefferies LLC is providing about 30% of the transaction financing — with another 20% coming from parties including Franklin Square Capital Partners, John Hancock Life Insurance Co. and Manufacturers Life Insurance Co. — but it is Icahn himself who put up the lion's share and pledged debt funding for the remainder from his own investment vehicles.

Securing $14 per share for Dell's other shareholders — Southeastern, still among them — will represent a financial win for Icahn, who will also enjoy being able to excuse himself from the burden of managing a multibillion-dollar PC titan through a secular decline.

And it's notable that once Icahn struck a deal with Southeastern to buy more of the investment manager's Dell stock, Icahn switched gears with the argument that the company's special committee should pony up another 35 cents to seal the buyout.

While the Americans will spend the 4th of July grilling and enjoying pyrotechnic displays, both Icahn and Dell will be charting out their remaining two weeks leading up to the company's shareholder vote on July 18. With Icahn having increased his stake and the founder sidelined from voting, expect the two titans to sit down for another bite and to iron out a common ground.

Michael Dell clearly doesn't want to lose his company, but Icahn probably doesn't want to run it, either.

-- Written by Jonathan Marino in New York

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