Icahn's Dell Bid: The Best Devil's Bargain
NEW YORK (TheStreet) -- Among the various takeout bids, Carl Icahn's $15 a share proposal for Dell
Icahn's proposed takeover, which Dell disclosed on Monday, comes amid mixed results for the activist in winning takeover battles and shareholder proxy campaigns.
In January 2012, Icahn walked away from a $15 a share tender for scrap metal specialist Commercial Metals
Icahn has seen his M&A luck turn, with a successful acquisition of CVR Energy
To be sure, Icahn's $15 a share proposal for up to 58% of Dell's shares trumps a $14.25 a share bid submitted by an investor group led by Blackstone and the initial $13.65 a share offer by Michael Dell and Silver Lake, which the company approved in early February. Still, analyzing prices may prove complicated given uncertainty of Dell's remaining equity value.
Icahn and Blackstone will also have to fill out details on their proposals and submit formal offers, which Dell said it intends to consider in takeover negotions.
The $15 a share proposal also comes with significant strings attached such as the assumed participation of large Dell shareholders Southeastern Asset Management and T. Rowe Price and a mélange of financing that includes about $5 billion from Icahn's coffers, a similar amount of bank financing and a seeming pillage of billions in the company's cash and accounts receivable.
All told, Icahn's proposal mixes a premium price with hard-to-notice pitfalls -- a classic move for the 77-year old activist, who constructed the Dell offer while managing other large investments such as recently acquired positions in Herbalife
Blackstone's $14.25 proposal, in contrast, resembles a simple private equity buyout with a firm price and the requisite debt financing committed by Morgan Stanley
"I would find the Icahn deal less attractive," said Howard Ward, chief investment officer at Gamco Investors, said in a CNBC interview when asked to contrast the Blackstone and Icahn Enterprises offers disclosed by Dell.
Making Icahn's case might be the hardest. Still there's a logical reason for shareholders to support Icahn's bid, beyond a price tag that trumps Blackstone and Silver Lake.
Icahn's last large foray into the tech sector was a multi-billion dollar breakup push for Motorola that led to the split of Motorola Solutions
Investors in the faltering hardware business would have to consider the breakup of Motorola and the sale of its handset unit as among the top turnarounds in the sector, in recent years.
Compared against the subsequent share price performance of Nokia
Icahn was also a catalyst for a board revamp at Yahoo!
The terms of Icahn's bid for Dell, while less certain than those offered up by private equity buyers, may be more appealing for the investor community at large.