Carl Icahn: New Dell deal that is vastly superior to that of Michael Dell's

Icahn Plays New Hand in Dell Deal Still

Carl Icahn phoned into Bloomberg Television’s 'Street Smart with Trish Regan and Adam Johnson' Thursday, and said: 'We are going to be coming up with a higher bid tomorrow morning'.

Icahn Plays Hand Dell Deal'A little bump on my part. That is what I am looking for…. We will add to that bid. We will warrant to that. The bid will be superior, even to what is already superior…We think it is worth more than $14. We will do a warrant which is will be valuable. This is vastly superior to the Dell deal…

'We are going to come and add to the package which we think is superior already. We think that it will be around $20, buy the stock at 20 and we will give the shareholders a piece that warrant. We think that will make it utterly superior and we will go to the independent board. We will show them this and tell them that we think it is superior. This is our recommendation and we hope that it has traction'.

Icahn said on Michael Dell

'Look at him, he is going in and catching a falling knife. He knows the company better than anyone. He is paying for it. I don’t think anybody would accuse him of doing this for charity or helping shareholders… Very often the founder of the company should not be running it later when it matures and I don’t think [Michael Dell] has done a good job and I think the board has been asleep on the switch. They should have held him accountable years ago. They have had a very poor performance. Instead of saying that you are out of here, they are going to reward him and give him this great bargain'.

Icahn on what company Bill Ackman has his eyes on

'I hope it is not Herbalife'

Icahn on announcing a new higher bid for Dell tomorrow

'We are going to be coming up with a higher bid tomorrow morning. A little bump on my part. That is what I am looking for. You are giving US $14. You have a 73-percent taking. I think this is superior to the $14.65. We will add to that bid. We will warrant to that. The bid will be superior, even to what is superior. We are giving $14. They are 75-percent. Then they will own the stub for 25-percent of the stock. We think it is worth more than $14. We will do a warrant which is will be valuable. This is vastly superior to the Dell deal… We are going to come and add to the package which we think is superior already.

'We think that it will be around $20, buy the stock at 20 and we will give the shareholders a piece that warrant. We think that will make it utterly superior and we will go to the independent board. We will show them this and tell them that we think it is superior. This is our recommendation and we hope that it has traction. You cannot be sure, obviously, so, we will see what happens. So you heard it here first'.

On why making a play for Dell is a no brainer

'We look for these. In this case, if you go for the rights, you will have literally a free put until December they themselves have said that they will not be able to close this until sometime in October and even then, it might be optimistic. Therefore, if you go for appraisal rights, you have 60 days after the time it consummates to pull out if you want to. Sometimes, Good things happen and the company would want to get rid of these appraisal rights that make a different deal with you. Also, you might want to continue to go and get the appraisal rights adjudicated because I think that Dell is worth at more than the $13.60 Five cents that Michael Dell is offering'.

'[The board is] drinking the Kool-aid that Dell tells them. In the PC Area, this is the second change going on. Dell will be able to take advantage of that. That is why we have such a great record. You don’t have to look quarter-to-quarter. In fact, you don’t make money for that. Dell has made $14 Billion in acquisitions over the last few years. Dell is in a great position to take advantage of the secular change going on, in our opinion. At the risk of being modest, I have been right a lot more than I have been wrong. We bought oil at 2000 when nobody like it. I don’t have to prove my record'.

On whether he is taking a similar risk at Michael Dell going to a judge for appraisal

'That’s right. Usually, the history of appraisal rights is that you get more. I want to make the point that you can make that decision sometime before the end of the year in my opinion. You don’t have to take the risk but you still might get the reward. That is why it is a great risk reward ratio. We have made fortunes over the year. It is amazing that a lot of people don’t do it because it does not appear obvious that you cannot possibly make money. You could do convertible bonds against the short position on stocks and you had no risk. When the market broke, you make a fortune. These are no-brainers. I will be talking about them from time to time and I mention them in my twitter account'.

On appraisal taking a long time

'There are a lot of smart professionals that do this and tie it up. I spoke to one this morning that is pretty big. They have done a great job. They have done a good job of going in and getting these appraisals. Especially in this case, which is unique. You have a company out there that is just badmouthing this company and is paying $13.65. If you really dig into it, I believe it is worth more than that. You could argue with that. They will pay you interest. When the appraisal is done, I think you get about an eight-percent on that money. BY the way, there are many banks that will loan you.

'That means that you don’t get liquidity. So, there was a lot of various guys that have made a great deal of money doing this. IN this case, it is a no-brainer because you don’t even have to do the appraisal, you can wait until December. So, that is why I say this is a good thing to do. I am not telling you go buy Dell. I am not here to say go'.

On putting himself in the hands in one judge to run the appraisal process

'He is a respected Judge. He said he would not five expedited discovery concerning whether the auction was fair or not. This has nothing to do with whether it is fair or not'.

On what happens to all the institutional investors that need to be invested in public companies and will be left with only an appraisal claim

'I will not say this is for everybody. There are institutions that will do this. That does not mean that it is not a good thing to do. It almost makes it easier for the company to make a deal and a settlement when there are not that many appraisals in there. So, this is not for everyone. That almost makes it exciting'.

'If you have less appraisals out there, very often the company wants to get rid of them and settle them. So, it is happening very often. They will just go along and settle it. A lot of good things can happen. I cannot tell you how many times over the past we went and did these no-brainers. People would laugh and say to me, how can you ever make money on them? IN 1968, I made 10 times my capital. They said, well, the market is booming or something like that.

'For you to take money on this, the market has to go down precipitously. I said, what the hell, I have no risk. Then, the market fell apart. There are arcane areas where you can do the puts, the calls. But I am saying that these do exist. I cannot tell you why you will do this. You have an infinite risk reward ratio. A lot of time you make a lot more than you believe you would have'.

On what he thinks Michael Dell and Silver Lake could do to make him feel like he is getting the right amount of money for Dell right now

'A lot has been said, we are only looking for a bump. We are looking for a fair price. I really do like this company. We have put up $5 Billion one way or another. Obviously, I think that they have read this completely wrong. They drank the Kool-Aid that Michael Dell put out saying that how bad the company is, the risk. If you don’t go for this deal, you have this gap. Between getting this money from Carl Icahn you have to worry that. I don’t think that anyone questions my credibility. It would come up after we have the money, we will do it. We have never promised the deal we did not deliver on.

'I think that they have completely misread this. Ironically, this is a lot less than the time that you have to wait to get money if you go with the Dell deal. You have to worry about China. You have to worry until October. I think that China will go through. You have to worry. There will be a bigger gap until you get the Dell deal. Then, will he win the proxy fight? The point is simple: I have a very good record. I think I have great credibility. I think that I will buy it and put up the money. Why would anybody vote for Dell ?'

On Michael Dell catching a falling knife

'I do think he is getting a great bargain. People do what is in their own self-interest. Michael is a smart guy. I don’t think he has run the company very well over the last four years. I think this would be a major bust. That does not mean that he is not a smart guy. If this CEO is all mice, he is catching a falling knife. That is not what he does. That is not what people do and cannot blame them for that. Look at him, he is going in and catching a falling knife. He knows the company better than anyone. He is paying for it. I don’t think anybody would accuse him of doing this for charity or helping shareholders'.

On whom he would put in charge of Dell today

'There are three or four guys that are really good for this. Nobody is going to accept a job if they have another good job or even if they don’t, walking into a beehive or a proxy fight… You take a look Chesapeake, you take a look at Philip Services. Motorola is a great example. None of these guys would have taken the job if they were talking into a proxy fight. I think that would be an added factor for this company to bring in the right CEO that could manage this company a lot better… Very often the founder of the company should not be running it later when it matures and I don’t think [Michael Dell] has done a good job and I think the board has been asleep on the switch. They should have held him accountable years ago. They have had a very poor performance. Instead of saying that you are out of here, they are going to reward him and give him this great bargain'.

On not having a provision that would allow for Michael Dell and Silver Lake to get out of the deal in the event that shareholders exercise the appraisal rights

'I think that we understand that. It is very unusual that you don’t put in a provision that you can’t opt out of a deal if you are the purchaser. The banks don’t like them. Therefore, there is motivation to sell the appraisal right thing. But, maybe the board did one good think in this whole deal because I think the board has not acted really for shareholders. That is my opinion on this one. I think it was good that they were not allowed. They would face a $750 million penalty. I think that Dell will definitely close. I think there is a risk there. There are material efforts to change risk. Too many people go for appraisal rights. I take umbrage of well, you have to worry about the Cap'.

On plan to get Dell back to where it was two years ago

'It is like asking a running back, what was your plan when you saw three guys coming at you and the guys good and he gets around him. He did not have a plan. These things have life of their own and if you want to talk about a plan here, I think that there is a great secular change going into the clouds. The PC is not going away. That is not going to be the screen, the mouse, the keyboard. This is the forefront with some of the technology to take advantage of that. They have service in the back office. People did not like the Motorola solutions for a while. This is embedded in every fire station and police station and everyone was ignoring that. We make a great deal of money with that. This issue I will say applies to Dell'.

Source: Bloomberg Television