Dell-HP Could Merge PC Businesses. Michael Dell would be Out – Ichan

Carl Icahn spoke with Bloomberg Television’s Trish Regan today on offering Dell (NASDAQ:DELL) investors $12 a share, seeking to upend a $24.4 billion buyout of Dell Inc. by its founder and Silver Lake Management LLC, and said: Michael Dell would be out, he would consider Mark Hurd, Michael Capellas, and Charles Phillips as next CEOs, he’s working on financing options to guarantee stub including putting up a $2B for bridge loan and if he gets the company he said he might acquire something like Hewlett-Packard.

Icahn said:”I think this board just gave this stock away to Dell, as boards too often do. This is a gripe with boards in this country. There are some good boards, but this is the quintessential example of a board not doing its job for shareholders.” Icahn said on Dell: “I laughingly say that I respect the way he has gotten the board to give him this bargain. I’ve never met him. I think he’s a smart guy, but he would not be the one to run this company.”

Icahn on Dell Inc. reviewing his offer:

“There is the ability for the independent board to find that our offer is superior. But it’s a very ambiguous contract. I think our offer is superior. Mathematically, there is no question it is superior. You have a choice of getting $12 and still owning dell, which has great potential. That alone is worth much more than $1.65. I think this board just gave this stock away to Dell, as boards too often do. This is a gripe with boards in this country. There are some good boards, but this is the quintessential example of a board not doing its job for shareholders.”

On why this aggressive move right now:

“Monday is the deadline to put up a slate. We said, we think that offer is superior. We would love to avoid a proxy fight, but we are prepared to do that now. We’re going to put up a slate, Southeastern and myself of 12 candidates. The way it would work would be if they don’t find our offer superior. We’re going to work assiduously to defeat the Dell offer. There’s going to be a vote on whether or not they want to accept the Dell offer. Southeastern and I will vote against that offer. We have 14%. We are very hopeful we will get that defeated. Once they defeat that, they can cover for our slate. We will take the company over and immediately give them $12 if they wish. They still will own Dell stock. Dell stock is worth much more than $1.65”

On the PC Business:

“There is a lot of criticism, and perhaps rightly so. The PC business is going downhill. In the case of Dell, we believe it will take a long time for it to go downhill. We believe the PC business is still extremely attractive for the short-term because it’s necessary. PC’s are not going way. Microsoft depends on Dells and Hewlett-Packards. We might acquire somebody in the business like Hewlett-Packard (NYSE:HPQ).”

“There is a lot more life to the PC Business. Eventually the PC Business is going downhill. There is a great deal of value in the PC Business. There is the software business. I think Dell is in a great position for that. With the cloud and a lot of the applications that is in middle size business. I think there is great potential. I think it’s a no-brainer to believe that all that is worth more than $1.65 a share.”

On whether Dell could acquire someone else like Hewlett-Packard:

“There is a shot down the road that we could – with the PC Business – Merge with Hewlett-Packard. We also have what I consider to be a very undervalued business and software. Davey Johnson works for Dell for Three years. Before that, he worked for IBM for 25 or 30 years doing software acquisitions. He then left Dell and went to Blackstone (NYSE:BX), where he was really for acquiring this company based on these acquisitions. This is what I’m surmising. You at Dell have not even seen the real fruition of those acquisitions in the software business. There is great synergy with what Dell has. I’m certainly not an expert in this. I have made my money looking at things simplistically. After you got your $12, what you would have is worth a lot more than $1.65″

On where the money is coming from:

“You have a bunch of cash at dell. You have the receivables. We estimate we would have to borrow $5.2 Billion. Michael Dell is borrowing $17 Billion. But we have to borrow $5.2 Billion. There are standard skeptics who say ‘you don’t have a CEO’. I understand the skeptics who say, ‘You don’t have a CEO.’ Jefferies has pretty much committed to us, $1.6 Billion for the blance sheet. We have not even started looking to other banks yet. We don’t think there will be any trouble with it. We’re going to have to bride loan of that $5.2 Billion at the time that we take over the company. If I have to, I will put up $2 Billion. That’s not going to be any problem with that $5.2 Billion.”

On if the size of this deal:

“It’s about $23 Billion.”

On Michael Dell:

“We have nothing against Michael Dell. We think he has not done a great job over there. We think it’s very important that you have a new CEO here. If you look back recently where we put in new CEO’s, the companies have done well. Pimco, they got $3.5 Billion. There are many others where we did this very successful. We think here we would want to have a new CEO, which we, the new board, would select.”

“It’s not me that is just going to have control. It would be invaluable to get a massive change in management there. I’m putting up six candidates. Southeast is putting up six candidates. There will be people I don’t know that have technological backgrounds. We will have a lot to say, as we did in the pase. We need more than a bit of a cultural change at Dell. Michael Dell, I just think he’s not the guy for that at this point. I’m not saying it alone.

“I have nothing against Michael Dell. I have respect for him. I laughingly say that I respect the way he has gotten the board to give him this bargain. I’ve never met him. I think he’s a smart guy, but he would not be the one to run this company. ”

On the fate of Dell Inc.’s board:

“The board would be out completely. I have nothing against the board. I think they are a quintessential example of a board that did a really poor think to shareholds. They did not live up to the fiduciary duty by allowing Dell to buy this at this bargain price. The board could easily have given them the alternative that I’m giving them. ”

“I believe the business has gone downhill for 4, 5 years. There is still a great value in the assets of this company. It’s a gift at $1.65. I make my money looking at things simplistically. This is simple. It’s worth more than $1.65.”

On whether the next CEO would come from the cloud computing space:

“Yes, we have certain ones in mind… The best CEO is not going to come in under this Hostile”

On Mark Hurd, Michael Capellas and Charles Philips:

“I’m not going to talk about it on TV. You are mentioning names that would be considered. We have a number of candidates that would be happy or interested in doing it. It’s got great potential, especially on the software area. You don’t discount the fact that there is a great software area here that David Johnson has put together over the last three years.

On the challenge for the next CEO coming in the middle of a hostile:

“They’re not going to come in, in the middle of a hostile. They would come in after we win, if we win. We are not bringing in a CEO now. You don’t get the best candidate coming in when you’re in a hostile situation. I have done this before, where you do it in peace… A new CEO does wonders. How would you like to have the same President of the United States for 30, 40 years?”

On people who are shorting the stock right now:

“Not my job to tell them anything. I don’t tell shorts what they should be doing… I’m not here to argue with shorts. I did that once. I’m not doing that again.”

On what he thinks shareholders are going to do here:

“Sometimes I have been surprised. As Lincoln said: ‘You can’t fool all of the people all of the time.’ It’s a no-brainer. Why wouldn’t you want this for $1.65?

On when you know you see a good deal:

“I tell my guys, if you show me a deal, I want to see it on the back of an envelope. Your instincts work for you. It’s like a tennis player. You just look at it, but it’s just instincts. Everyone in a while the instincts come to play and you look at a deal and say, it’s ridiculous. This is one of the great giveaways that I see. Dell is buying it with their shareholder money. It is like something out of “Saturday Night Live.”

  • Full Interview for viewing and embedding here
  • Icahn: Michael Dell Should Not be Dell CEO [Video clip]
  • Ichan: Dell Board Gave Stock away to Michael Dell [Video Clip]

Courtesy of Bloomberg Television

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