(Reuters) - Billionaire
investor Carl Icahn and affiliates provided $3.42 billion, or 66 percent,
of the $5.2 billion in committed debt financing to back his proposed
leveraged recapitalization plan for personal computer maker Dell Inc.
Lead arranger Jefferies & Co committed $1.6 billion, or 30 percent of the
overall financing, according to a Securities and Exchange Commission
filing Monday. An additional 14 institutional funds, including pension
funds and insurance companies, provided the remainder of about $179
million.
Though the $5.2 billion deal was shown to a mix of U.S. and foreign banks,
asset managers, hedge funds and collateralized loan obligation (CLO)
managers, the small list of participants suggests Icahn was unable to
attract enough interest from alternative sources of capital, sources told
Thomson Reuters LPC.
Other market participants evaluating the transaction said it signals Icahn
may never have aimed to broadly distribute the deal in the first place.
Icahn on Monday asked for a meeting with Dell Inc's special board
committee after lining up the loan commitments to back up his Dell bid.
Icahn and Southeastern Asset Management are asking shareholders to tender
1.1 billion shares at $14 apiece in an offer that rivals Michael Dell's
and Silver Lake Partners' $24.4 billion buyout offer of $13.65 a share.
The financing commitment marks a crucial step forward for Icahn's bid for
Dell. Still, it is contingent on a dozen board appointments, according to
the SEC filing.
Unless all twelve of the nominees proposed by Icahn and Southeastern on
May 13 are elected to Dell's board, the financing is unlikely to take
place.
"It's an exit hatch," an institutional investor said of the condition.
"This signals the financing will not happen at all. It's such a high
hurdle to get all his guys on the board."
The next step in Icahn's pursuit of Dell is to persuade ISS, an
independent shareholder advisory group, to back Icahn's bid. ISS is
expected to make public its view as early as this week. A July 18
shareholder vote on Dell's take private plan will follow.
If
ISS moves in favor of Icahn's plan, Michael Dell may or may not increase
his $13.65 offer to $14 or $14.25, two investors said.
"It's a game of chicken," a shareholder said. "Icahn's going for the
bump."
A
Dell spokesman was not immediately available for comment. Calls to Carl
Icahn were not returned by press time.
Icahn's proposed tender offer will be financed with $7.5 billion of cash
on the balance sheet, the $5.2 billion credit facility and $2.9 billion
from the sale of receivables.
The $5.2 billion financing includes a $2.2 billion, six-year term loan B-1
and a $3 billion, 3.5-year term loan B-2.
Pricing on the TLB-1 is set at LIB+400 with a 1 percent Libor floor, while
pricing on the TLB-2 is set at LIB+350 with a 75 basis-point Libor floor.
Both tranches are offered at a discount of 99.5 cents on the dollar and
will carry 101 soft call protection for one year.
If
Icahn's proposal prevails, the loans would launch to a more broad range of
institutional investors before September 30, or the three-month commitment
period of the $5.2 billion loans, according to sources.
(Reporting by Michelle Sierra and Leela Parker; Editing by Caleb Frazier
and Lynn Adler)
Founder told to sweeten
offer for Dell as Icahn ups the stakes
By Soyoung
Kim, Michelle Sierra and Leela Parker
NEW YORK | Tue Jul 2, 2013 11:46pm EDT
(Reuters) -
Michael Dell has been advised to raise his $24.4 billion offer for
Dell Inc, coming under further pressure as billionaire investor
Carl Icahn revealed he had committed more than $3 billion to back an
alternative proposal.
The PC maker's special committee told Dell's founder and chief executive a
few days ago that he should raise his offer if he wants it to succeed, a
person familiar with the matter said on Tuesday.
The special committee, which was formed to independently assess what the
best option for Dell shareholders is, came to that conclusion based on its
meetings with investors as well as concerns over a key upcoming
recommendation by investment advisory firm ISS, the person said.
ISS is expected to publish its view on whether Michael Dell's offer, which
is backed by equity financing from buyout firm Silver Lake, is in the
interest of Dell's shareholders as early as next week. A July 18
shareholder vote on Dell's take-private plan will follow.
Despite being advised by the special committee that he should raise his
offer to see the transaction through, Michael Dell was non-committal, the
person added, confirming an earlier report by Bloomberg News.
Dell Inc and Silver Lake declined to comment.
The special committee's move came as Icahn and his affiliates disclosed on
Tuesday they had provided $3.42 billion, or 66 percent, of the debt
financing to back his bid for
Dell.
Investment bank Jefferies & Co provided $1.6 billion, or 30 percent of the
overall $5.2 billion in committed financing with the remainder of about
$179 million coming from 14 institutional funds, including pension funds
and insurance companies, according to a U.S. Securities and Exchange
Commission filing.
"The fact that he could not get lending from other banks suggests they are
not too friendly to this," said Steven Kaplan, a University of Chicago
finance professor. "However, one must note that a few banks are locked
up with the Silver Lake offer."
"On the positive side, Icahn is putting a lot of money where his mouth
is," Kaplan added.
Other market participants evaluating the transaction said Icahn's move
could indicate he may never have aimed to broadly distribute the deal in
the first place.
Calls to Carl Icahn, who runs Icahn Enterprises LP, were not immediately
returned.
Icahn and Southeastern Asset Management are preparing an offer that would
see shareholders tender 1.1 billion shares at $14 apiece, rivaling Michael
Dell's and Silver Lake's $24.4 billion buyout offer of $13.65 a share.
The billionaire investor has said Michael Dell's offer substantially
undervalues the company. Dell's special board committee had recommended
Michael Dell's offer to shareholders.
While the financing commitment marks a crucial step forward for Icahn's
bid for Dell, it is contingent on a dozen board appointments, according to
the SEC filing.
Unless all 12 of the nominees proposed by Icahn and Southeastern on May 13
are elected to Dell's board, the financing is unlikely to take place.
Icahn's proposal will also be put to shareholders only if the offer by
Michael Dell and Silver Lake is not accepted by shareholders when they
meet on July 18.
'GAME OF CHICKEN'
All eyes are now on ISS. If it moves against Michael Dell's offer, he will
be under even more pressure to raise it.
"It's a game of chicken," a shareholder said. "Icahn's going for the
bump."
Speculation about a possible bump in the offer price began on Tuesday with
a CNBC report that cited sources claiming that Michael Dell's camp was not
feeling confident that ISS will recommend his offer. An ISS spokeswoman,
however, said that ISS was still working on its analysis and never signals
its recommendation in advance.
Another person familiar with the matter reiterated on Tuesday that neither
Michael Dell nor Silver Lake have made any decision on whether to increase
their offer.
All sources spoke on condition of anonymity because the matter is
confidential.
The $5.2 billion financing deal put together by Icahn was shown to a mix
of U.S. and foreign banks, asset managers, hedge funds and collateralized
loan obligation (CLO) managers.
Icahn's proposed tender offer will be financed with $7.5 billion of cash
on the balance sheet, the $5.2 billion credit facility and $2.9 billion
from the sale of receivables.
If
Icahn's proposal prevails, the loans would launch to a more broad range of
institutional investors before September 30, or the three-month commitment
period of the $5.2 billion loans, according to sources.
(Additional reporting by Poornima Gupta in San Francisco and Greg
Roumeliotis and Jessica Toonkel in New York; Editing by Caleb Frazier,
Lynn Adler, Lisa Shumaker and Edwina Gibbs)
©2013 Thomson Reuters.
