×

Welcome to the Slashdot Beta site -- learn more here. Use the link in the footer or click here to return to the Classic version of Slashdot.

Thank you!

Before you choose to head back to the Classic look of the site, we'd appreciate it if you share your thoughts on the Beta; your feedback is what drives our ongoing development.

Beta is different and we value you taking the time to try it out. Please take a look at the changes we've made in Beta and  learn more about it. Thanks for reading, and for making the site better!

Rival Dell Buyout Plans Duke It Out

samzenpus posted about a year ago | from the last-bid-standing dept.

Businesses 59

jfruh writes "Michael Dell's plan to take the company he founded private, with help from Microsoft, isn't going smoothly. Corporate raider and major Dell stockholder Carl Icahn has presented a rival plan that would shut Michael Dell out. Perhaps predictably, the Dell board isn't sold on Icahn's idea, saying it will leave the company short of cash, even though they haven't been able to fully evaluate it yet."

cancel ×
This is a preview of your comment

No Comment Title Entered

Anonymous Coward 1 minute ago

No Comment Entered

59 comments

Icahn is bluffing (4, Insightful)

JoeyRox (2711699) | about a year ago | (#43710401)

He has no interest in the company - he just wants a quick payday. Problem for him is nobody is really that interested in Dell, so his machinations aren't going to work this time. It's comical that he thinks the company is worth north of $20/share.

Re:Icahn is bluffing (5, Funny)

game kid (805301) | about a year ago | (#43710475)

"Why am I making such a big offer for Dell that would drive out Mr. Dell? Because Icahn."

Re:Icahn is bluffing (-1)

Anonymous Coward | about a year ago | (#43710567)

Hey ho, the derry o, the Raider in the Dell.

Re:Icahn is bluffing (5, Informative)

Penguinisto (415985) | about a year ago | (#43710489)

Exactly. A quick look at his little history (especially with Yahoo a few years back) shows that he's only in it to score some meat from a dying company while the victim is still breathing. Notice that he doesn't really go after healthy, growing companies - only those which show signs of being in serious trouble.

I suspect that if you work for a larger company? A perfect indicator of your corp being in deep kimchi would be the presence of Carl Icahn's active attempts at your company's financials... it's like seeing the Angel of Death, only he's going after the board of directors.

Re:Icahn is bluffing (5, Insightful)

alen (225700) | about a year ago | (#43710577)

the original premise behind private equity was to buy a down on its luck company, fix its problems and get it profitable again. then sell it and pocket the profit on the real effort you did.

today's version is to buy up a company with low debt and strong cash flow, saddle with debt, take the cash and run. management and shareholders like it as well since they get paid too

buying up healthy companies screws the employees

Re:Icahn is bluffing (3, Informative)

mabhatter654 (561290) | about a year ago | (#43710615)

Or in this case, Dell buys ITSELF back from stockholders "at large" and gets to decide who plays. So they can run the company without month-to-month dealing with these frivolous stockholder games.

Re:Icahn is bluffing (2)

Chris Mattern (191822) | about a year ago | (#43710801)

They also save a nice bundle of tax money. Profits that are paid out to shareholders in dividends have to have income tax paid on them by the corporation, and the shareholders then have to pay income tax on those dividends themselves. Interest on debt is an expense and the corporation doesn't pay tax on it (although the debtholder still does when he collects it).

Re:Icahn is bluffing (1)

Steve Hamlin (29353) | about a year ago | (#43720065)

Sure, but here you have the CEO telling the other shareholders that as long as he works for them, he can't improve the value of the company above $13 and change per share, but if they go away, he has great structural and product ideas to improve that value. (and no, the compliance costs of being a public company is not the difference)

He cannot argue both of those points simultaneously and expect not to get pushback from shareholders who think he is pulling a fast on on them. If he is correct in his view of the future, then he should be fired as current CEO immediately.

Re:Icahn is bluffing (1)

mabhatter654 (561290) | about a year ago | (#43726017)

Sure he can. Stockholders only care about the NEXT paycheck so they can cash out. Mr Dell wants to pull an Apple and pool his resources for a big new direction. That means he needs a few quarters off the hamster wheel. He wants to not worry about sales and take the company in for an overhaul. You simply can't do that with guys like Ichan constantly meddeling in what's not their job.

It's the same problem JC Penny CEO had .. It didn't start making money in 3 quarters with the changes only half done. That's why you take the company private, so everybody at the board table agrees with the risks ands some minority player cannot disrupt the works.

Re:Icahn is bluffing (1)

Anonymous Coward | about a year ago | (#43710995)

today's version is to buy up a company with low debt and strong cash flow, saddle with debt, take the cash and run. management and shareholders like it as well since they get paid too

buying up healthy companies screws the employees

That's always been what the private equity or as it was known back then, corporate raiders, did.

I have never seen when they bought a "down on its luck" company, fixed it up, and sold it at a profit. If they did fix it, it was by accident.

Companies that were down on its luck were usually fixed up by someone that the board brought in - IBM and Lou Gerstner as a perfect example or Apple and bringing back Jobs.

Re:Icahn is bluffing (1)

mitgib (1156957) | about a year ago | (#43710665)

Exactly. A quick look at his little history (especially with Yahoo a few years back) shows that he's only in it to score some meat from a dying company while the victim is still breathing. Notice that he doesn't really go after healthy, growing companies - only those which show signs of being in serious trouble.

Netflix doesn't seem to be showing signs of trouble, or serious trouble. They had a big bump in the road with Quickster, but seem to be all stream ahead now.

Re:Icahn is bluffing (1)

Penguinisto (415985) | about a year ago | (#43710795)

You have to give it some time before Icahn gets interested. Netflix had a transient bump in the road, while Yahoo and Dell have had year-on-year headaches for stockholder and CFO alike.

There seems to be a theme of what could best be termed the 'has-been' factor (companies that were once-great, have strong brand recognition, but are no longer serious contenders). For instance, I think that if Nokia were based in the US and not Finland, Icahn would be busily trying to rape them right now instead of Dell.

Re:Icahn is bluffing (2)

David_Hart (1184661) | about a year ago | (#43714687)

Exactly. A quick look at his little history (especially with Yahoo a few years back) shows that he's only in it to score some meat from a dying company while the victim is still breathing. Notice that he doesn't really go after healthy, growing companies - only those which show signs of being in serious trouble.

I suspect that if you work for a larger company? A perfect indicator of your corp being in deep kimchi would be the presence of Carl Icahn's active attempts at your company's financials... it's like seeing the Angel of Death, only he's going after the board of directors.

This happened at the company that I work for. The company had some serious business issues that drove our stock down. We would have recovered but Icahn came in, worked to get members on the BOD, and sold us off to another company. In our case, it actually worked out well as the company that purchased us badly needed diversification and kept most employees on and the division intact.

Two pieces of advice: 1. If Icahn comes calling for your company, buy up as much stock as possible, especially if you have an ESPP program. 2. Make sure your resume is up to date as your company will be sold.

He just wants a free company (0)

Anonymous Coward | about a year ago | (#43710671)

Icahns offer works out at $12 a share, lower than Dells offer.

http://www.engadget.com/2013/05/10/dell-icahn-southeastern-counteroffer/

"Carl Icahn and Southeastern Asset Management have both opposed the $24.4 billion / $13.65 per share buyout proposal from the start and have an alternative proposal: a $12 per share dividend, funded by Dell's $9 billion in cash and $5.2 billion in new debt."

So his pitch is:

Shareholders give him the company and its cash.
Icahn hands back the cash part, borrows some against the company part and hands that back.
He gets company for free.
Profit (but for Icahn not for you)

If you don't accept he threatens to tie up the company in lawsuits and try to displace the management with his appointees (like he did with Yahoo, destroying most of their value).

Re:He just wants a free company (2)

rudy_wayne (414635) | about a year ago | (#43711059)

Icahns offer works out at $12 a share, lower than Dells offer.

http://www.engadget.com/2013/05/10/dell-icahn-southeastern-counteroffer/

"Carl Icahn and Southeastern Asset Management have both opposed the $24.4 billion / $13.65 per share buyout proposal from the start and have an alternative proposal: a $12 per share dividend, funded by Dell's $9 billion in cash and $5.2 billion in new debt."

So his pitch is:

Shareholders give him the company and its cash.
Icahn hands back the cash part, borrows some against the company part and hands that back.
He gets company for free.
Profit (but for Icahn not for you)

I'm not an expert in corporate finance, but this doesn't add up. Under that plan, Icahn gets Dell, but Dell no long has any cash because Icahn spent it all paying out the dividend to shareholders and Dell is $5 Billion in debt (the amount borrowed to pay the rest of the dividend to shareholders). I see no "profit" for Icahn in this unless he chops up Dell and sells it off (which is what often happens n these type of deals).

Re:He just wants a free company (2)

the_B0fh (208483) | about a year ago | (#43711139)

1) He is part of the shareholders (12% to 20% ownership - large chunk of cash right there)
2) You just answered your own question. He's already selling off Accounts Receivables.

Re: He just wants a free company (0)

Anonymous Coward | about a year ago | (#43711175)

He's a shareholder and gets a share of the money paid to shareholders, plus the company, which still has value and can be sold for a profit in the future.

Re:Icahn is bluffing (1)

magarity (164372) | about a year ago | (#43710893)

Problem for him is nobody is really that interested in Dell, so his machinations aren't going to work this time.

Actually no, the problem is that Mr Dell IS interested in Dell which is why Icahn's mechinations aren't going well.

Re:Icahn is bluffing (2)

phantomfive (622387) | about a year ago | (#43711449)

It's comical that he thinks the company is worth north of $20/share.

If you look at the cash and assets that dell has saved up, Dell is worth $20 a share, even if they don't sell another computer ever. That is why it is worth so much.

Re:Icahn is bluffing (2)

Bigby (659157) | about a year ago | (#43712523)

The total equity for the company is $10.7B. It has grown steadily $1.2-2.2B per year. Both debt and assets are increasing at a steady pace, but assets are outpacing debt.

$10.7B/1.75B shares ~ $6/share. How is it worth $20/share? On top of that, their assets are as valuable for someone else as they are for them, AT BEST.

Also, the 1.75B probably doesn't include all shares...

Re:Icahn is bluffing (0)

Anonymous Coward | about a year ago | (#43715149)

Total equity doesn't matter, all that matters is how much you can extract from the company before declaring bankruptcy

all about the $$$ (4, Interesting)

ganjadude (952775) | about a year ago | (#43710501)

I dont think he has any real interest in buying the company. I think he is trying to leverage a higher payout on his shares in the end. Cant blame him for wanting to maximize his cash but he is really acting like a dick

Re:all about the $$$ (1)

rudy_wayne (414635) | about a year ago | (#43710961)

I dont think he has any real interest in buying the company. I think he is trying to leverage a higher payout on his shares in the end. Cant blame him for wanting to maximize his cash but he is really acting like a dick

I'm pretty sure Carl Icahn has never actually bought any company. He just makes a lot of noise and causes a lot of trouble until they pay him to go away.

Re:all about the $$$ (1)

EvilSS (557649) | about a year ago | (#43711131)

Uh, does TWA ring any bells?

Re:all about the $$$ (0)

Anonymous Coward | about a year ago | (#43742905)

1. Where is TWA now? 2, Who made money and how much (Icahn, top management, investment bankers, initial shareholders)? 3. Who lost money and how much (final shareholders, employees, current and future retirees, creditors?

Re:all about the $$$ (1, Insightful)

Ryanrule (1657199) | about a year ago | (#43712645)

"Cant blame him for wanting to maximize his cash"

I sure as shit can.

Re:all about the $$$ (1)

ganjadude (952775) | about a year ago | (#43714093)

really? does that mean you wouldnt? we all think hes a dick, but can we blame him? if i were in his shoes id sure as hell try and maximize my profits

Re:all about the $$$ (1)

Ryanrule (1657199) | about a year ago | (#43715793)

Just because something is legal, does not make it ethical.

Also, when you have money like this fuckface, its about as unethical as it gets.

Re:all about the $$$ (1)

fulldecent (598482) | about a year ago | (#43713371)

"I think he is trying to leverage a higher payout on his shares in the end. Cant blame him for wanting to maximize his cash but he is really acting like a dick"

Who's more of a dick: Carl Icahn trying to maximize his cash on a per-rata basis along with everyone else that owns the company... or Michael Dell trying to maximize his cash which is in direct conflict with the interests of the other people that own the company?

Re:all about the $$$ (2)

ganjadude (952775) | about a year ago | (#43714101)

well the company is DELL computers... if michael DELL wants to own his own company, i dont see how thats him being a dick... its his company, and its named after him....

Sounds like a Romney Style Buyout / Shakedown (0, Insightful)

Anonymous Coward | about a year ago | (#43710513)

What kind of sleazy operator would really try to buy out a company by loading it up with debt?!

I mean, I know that Republican Presidential candidate Willard "Mitt" Romney specialized in these types of leveraged buyouts, but he left a trail of broken companies in his wake.

Seriously, after watching Mitt Romney load companies up with debt which he used to "buy" it, and then letting the company implode under the load of its debt, what serious investor could agree to such a proposal?

Re:Sounds like a Romney Style Buyout / Shakedown (1)

fuzzyfuzzyfungus (1223518) | about a year ago | (#43710623)

I assume that the plan involves promising the investors serious enough to matter a cut of the spoils, and then just rolling over the rest of them...

It's not like it's news that these sorts of buyouts are the M&A equivalent of a chestburster in a pinstripe suit; but there isn't exactly a shortage of available capital that doesn't much care how the returns are generated, just so long as they are good...

Re:Sounds like a Romney Style Buyout / Shakedown (1)

tnk1 (899206) | about a year ago | (#43710673)

Seriously, after watching Mitt Romney load companies up with debt which he used to "buy" it, and then letting the company implode under the load of its debt, what serious investor could agree to such a proposal?

The ones who think they can sell their shares for $20/share to suckers, right alongside with Icahn.

Re: Sounds like a Romney Style Buyout / Shakedown (1)

UnknowingFool (672806) | about a year ago | (#43710787)

The kind of investor that likes these kinds of buyouts are the ones who are in it for the short term. They bought/will buy Dell when it is low and then wait for a temporary boost in the stock price after the deal goes through then sell quickly. The long term investors/employees who have Dell stock in a retirement fund like an IRA will get screwed.

Re: Sounds like a Romney Style Buyout / Shakedown (1)

Anonymous Coward | about a year ago | (#43711039)

I guess you're trying to refer to Enron where employees had Enron stock in their retirement account and couldn't sell it. As a current Dell employee, I can tell you that we don't have Dell in our 401(k) (at least not directly -- it may be in mutual funds. The fund manager can sell any Dell stock and we can move our money to other funds). There is an Employee Stock Purchase Plan... but once the stock is purchased, we own it and can sell it at anytime. Anybody who owns Dell stock in a self-directed IRA can sell it any time.

So basically, you're a retard and have no idea what you're talking about.

Re: Sounds like a Romney Style Buyout / Shakedown (0)

Anonymous Coward | about a year ago | (#43711975)

As a former Dell employee, I recall that it WAS in your 401(k) as an option. I did not put a penny there, even from the day I was hired Dell struck me as the sort of place where management would sell their moms for that penny.

Re: Sounds like a Romney Style Buyout / Shakedown (1)

quarmar (125648) | about a year ago | (#43712661)

Actually, Dell does have Dell stock in its 401(k) and it doesn't have an employee stock purchase plan...

Re:Sounds like a Romney Style Buyout / Shakedown (1)

mabhatter654 (561290) | about a year ago | (#43710897)

That's the game. You are "freeing" the rank and file employees to play on a level field with all the other companies... Right after the investors and managers get THEIR CASH OUT. Essentially, these deals borrow money against existing paid-off capital to payoff investors to reduce the number to qualify as a private company again. So you are trying to pay people extra money to cash out and leave now.

Even the bankers are in on it, because the employees are saddled with higher interest rates on everything, even things the old boss paid cash for. That's where the cry for "work ethics" kicks in for workers to "do what it takes" to keep their jobs. And how Unions become the big bad guys.. Because they are working for cash at WORK TIME for the new managers when the old owners cleared out the cash long before. This is what killed Twinkies.

Re:Sounds like a Romney Style Buyout / Shakedown (0)

JonJ (907502) | about a year ago | (#43711153)

It's a time honored tradition in 'murica. The Glazers are gleefully practicing it.

Baloney. Icahn is nothing like Bain. (2, Insightful)

jensend (71114) | about a year ago | (#43713027)

Right, "broken companies" like Staples, Sports Authority, Domino's, Experian, etc etc. Oh wait, all of those are doing a heck of a lot better than they were before.

Bain took risky buys, companies that were failing, and turned a healthy number of them into successes. Not all their buys worked out but you don't blame the doctor by complaining that his patients have all been sick.

You know, Obama won the election; you can quit with the falsehoods and slander already as it doesn't serve any purpose any more.

Re: Baloney. Icahn is nothing like Bain. (1, Interesting)

Anonymous Coward | about a year ago | (#43713643)

Notice a pattern in those you named? Romney didn't run them.

And he didn't take risks either, he made sure to get paid first.

Blame all you want on Obama whiners, Romney and his ilk are nothing but parasites, and you'll probably blame the unions while he walks away with millions in the bank.

Purely Self-Serving (1)

Anonymous Coward | about a year ago | (#43710531)

It can safely be assumed that any proposal put forward by Carl Icahn is purely self-serving to the detriment of anyone who gets in his way. If his bid wins, you can write off Dell as a company - he will raid everything of value and the company will be left in shambles within two years, tops. Michael Dell, however, will do everything possible to salvage the company and turn it around and make it into the company it deserves to be. I'm sure shareholders will only care about what's in it for them but I can virtually guarantee that, while Icahn is going to make his proposal sound fantastic for their short-term bottom line, he doesn't care about anyone else's bottom line - he cares only about his own.

Also Icahn will leave thousands of people unemployed as Dell collapses and is torn apart. Michael Dell will at least keep people employed.

Yeah, can you guess which bid I hope wins out?...

Re:Purely Self-Serving (0)

rudy_wayne (414635) | about a year ago | (#43710597)

It can safely be assumed that any proposal put forward by Carl Icahn is purely self-serving to the detriment of anyone who gets in his way. If his bid wins, you can write off Dell as a company - he will raid everything of value and the company will be left in shambles within two years, tops.

I can't disagree with that. However:

Michael Dell, however, will do everything possible to salvage the company and turn it around and make it into the company it deserves to be.

Is just absurd. Michael Dell returned as CEO 6 or 7 years ago. If he will " turn it around and make it into the company it deserves to be" why hasn't he done it already? What's he waiting for? Maybe he can do a better job running Dell once the deal is complete and they are $24 Billion in debt?

Re: Purely Self-Serving (1)

UnknowingFool (672806) | about a year ago | (#43710731)

Whether Michael Dell can succeed is a different matter, but he will try to turn the company around. Icahn is in it to make money even if that means destroying Dell as a company.

Re: Purely Self-Serving (4, Insightful)

rudy_wayne (414635) | about a year ago | (#43710915)

Whether Michael Dell can succeed is a different matter, but he will try to turn the company around. .

Whether or not Michael Dell will successfully turn Dell around is not the question. The question is, why hasn't he done it already since he's been CEO for about 7 years. If he hasn't been able to do it in the past 7 years, why would the next 2 or 3 years be any different?

Re: Purely Self-Serving (1)

Austerity Empowers (669817) | about a year ago | (#43712015)

He believes that Wall St. is ruining his company, and I agree with him, having worked there.

Of course I'm not sure he can turn it around, he's a bit too far up the MBA rectum I think to turn a technology company around.

Re: Purely Self-Serving (1)

Anonymous Coward | about a year ago | (#43712637)

That's why he's trying to take it private again. Stockholders demand sustained double digit growth. Sometimes to get a company that is floundering stable and successful again it requires investment in new technology and ideas. Stockholders seeing declining growth often lack the patience it takes to get there. They're resistant to spending money when the company is losing money. This fear has killed many a corporation. Now that doesn't mean spending willy nilly is a good idea either, but if you are so worried about losses that you invest nothing in the future then it's pretty easy to see how that's going to end. By taking the company private again Mr. Dell gets rid of that problem and can focus on long term strategy without having to worry so much about short term growth. They may stay flat or even decline a bit more before they bounce back but if they're doing R&D, moving forward with new technology they will be successful again.

Re: Purely Self-Serving (0)

Anonymous Coward | about a year ago | (#43713257)

R&D? Dell has always been a box shifter. For Dell as a company to seriously ramp up R&D would be like expecting Motel 8 to install business suites and helipads in their motels. They're just not in that line of business, and while they did very well 10 years ago they've left themselves adrift in a highly commoditized market with no value or distinction from anyone else who can beat them on price/margins.

Not supposed to do that? (1)

mabhatter654 (561290) | about a year ago | (#43710537)

Didn't Dell's board strike a deal with Ichan just a month ago and he wasn't going to go the "make a bunch of noise" route? More importantly he was going to stop causing trouble?

Re:Not supposed to do that? (3, Funny)

Anonymous Coward | about a year ago | (#43710611)

Oh, you believed his promises? What next, you're going to marry a prostitute and rebuild a shipyard to make up for the fact that you've spent your life raping the world?

Another company goes with Microsoft? (1)

devent (1627873) | about a year ago | (#43710789)

I thought the example of Nokia should be enough now. That's sad, I really enjoy my Vostro laptops.
I guess after the deal is done Dell will be offering Windows RT and Windows 8 tablets and go south.

michael dell (0)

Anonymous Coward | about a year ago | (#43710831)

has a huge conflict of interest. basically he own enough of the company that he can screw the rest of the shareholder by letting himself and his friend buy the company at a 'good' price

Great name for a Duke Nukem Sequel (0)

Anonymous Coward | about a year ago | (#43712553)

Duke. It. Out.
Coming in 2016. Really.

Reputation (1)

ChrisMaple (607946) | about a year ago | (#43716673)

Icahn's reputation compared to others in the field of buying control of companies is pretty good, if what you value is keeping good parts intact and shedding waste.
Check for New Comments
Slashdot Account

Need an Account?

Forgot your password?

Don't worry, we never post anything without your permission.

Submission Text Formatting Tips

We support a small subset of HTML, namely these tags:

  • b
  • i
  • p
  • br
  • a
  • ol
  • ul
  • li
  • dl
  • dt
  • dd
  • em
  • strong
  • tt
  • blockquote
  • div
  • quote
  • ecode

"ecode" can be used for code snippets, for example:

<ecode>    while(1) { do_something(); } </ecode>
Sign up for Slashdot Newsletters
Create a Slashdot Account

Loading...