Dell Inc. (DELL), Icahn Enterprises LP (IEP): Is This Bidding War About to End?

How the new deal is structured

Michael Dell’s new deal is valued at about $25 billion. The $13.75-per-share cash offer is roughly 10% higher than Dell’s original offer. In addition, the deal presents a “sweetener” in the form of a special dividend of $0.13 per share. All told, the new offer represents a premium of about 1.5% to Dell’s current share price of $13.65.

Criticism and benefits

Carl Icahn has leveled most of the criticism that this deal has received. In response to the news that Dell’s board had approved the deal, Icahn pronounced, “The war regarding Dell is far from over.” In particular, he takes issue with the way in which Dell’s board accepted the deal in an unusual closed-door session that occurred shortly after a regular shareholder meeting had been adjourned. Icahn’s next move is unclear.

Meanwhile, Dell’s offer promises a small arbitrage premium for patient investors and the assurance that the company will remain in the hands of its founder. Going forward, it seems likely that Dell will endure a prolonged period of private ownership under the guidance of Mr. Dell and Silver Lake Capital. However, the eventual IPO of a smaller, stronger Dell cannot be ruled out.

Additional hurdles

Given the positive reaction to Dell’s new offer, it seems likely that a majority of “non-Dell” shareholders will accept this deal. Since the board has already given its blessing, this would secure Michael Dell’s bid to take the company private and end the bidding war. However, Icahn has not lost all of his allies. He also has plenty of legal options available to him. His most recent statement hinted at the possibility of a legal challenge that centered around the questionable bending of Dell’s bylaws to allow a special board vote on the issue. The next few weeks could prove to be quite interesting.

Long-term outlook: Is the bidding war over?

While it would be unwise to regard the consummation of Michael Dell’s bid as an absolute certainty, it looks quite likely to occur. Investors may wish to position themselves accordingly. This would require an arbitrage-rich long position in Dell. More cautious investors may wish to hedge their bets with a long position in Icahn Enterprises LP (NASDAQ:IEP) or some other risk-sloughing vehicle. Regardless, this situation continues to interest investors, market-watchers, and pundits alike.

The article Is This Bidding War About to End? originally appeared on Fool.com is written by Mike Thiessen.

Mike Thiessen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Mike is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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