Carl Icahn and Southeastern Asset Management are in the process of arranging the finances to back their buyout bid for Dell Inc (NASDAQ:DELL), according to information sources have shared with Thomson Reuters LPC.
Icahn and Southeastern teamed up earlier this month to offer what is Icahn’s second bid to buy out the struggling PC maker. He made his first bid to rival the original leveraged buyout deal offered by the company’s founder Michael Dell and the private equity firm Silver Lake. Then he withdrew that bid, but it didn’t take him long to decide to try again.
Carl Icahn, Southeastern Getting Their Ducks In A Row For Dell
Today Thomson Reuters’ Michelle Sierra reported that Icahn and Southeastern have begun talking with asset managers and banks to start the syndication process for a $5.2 billion term loan B. The loan would back their buyout offer for Dell Inc (NASDAQ:DELL).
The source said Jefferies & Co is heading up the deal, and pricing is currently planned to be at 350 basis points over Libor. However, that could change because the process is currently in the early stages.
The firm handling the arrangement wants commitments for as much as $1 billion and expects to have a number of lenders lined up next week.
The New Deal For Dell
Icahn and Southeastern are two of Dell Inc (NASDAQ:DELL)’s largest shareholders at this time. Together, they own about 13 percent of Dell’s shares. Their new deal allows shareholders to hold onto their current shares and choose to receive either $12 per share in cash or $12 per share in Dell stock, which would be valued at $1.65 per share under the deal.
If Dell opts for this new deal, it would be financed by the $5.2 billion in new debt that Icahn and Southeastern are lining up, along with the company’s existing cash. They have argued that the original deal undervalues the company.
Mr. Dell’s Original Offer
Mr. Dell’s leveraged buyout offer, on the other hand, would take the PC maker private at a value of $13.65 per share, which adds up to $24.4 billion. The company has received debt commitments amounting to $13.75 billion to back the original offer. Those commitments came from several banks and Microsoft Corporation (NASDAQ:MSFT).