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Dell to Icahn: Show us the money

May 13, 2013: 7:55 AM ET

Dell asks Carl Icahn for more details about his "superior proposal."

icahn-vs-dellFORTUNE -- Dell Inc.'s special committee this morning told Carl Icahn that it needs more information about his offer to buy the company, including where he intends to get the debt financing.

Icahn last week reiterated his position that Michael Dell and Silver Lake Partners are basically stealing Dell (DELL) via their $13.65 per share take-private offer, and that he could do better with a $12 per share offer that also includes a public equity stub. His bid is in partnership with fellow dissident shareholder Southeastern Asset Management, who hold a combined 11.5% ownership stake.

But Icahn did not say where he would get the money, namely a $5.2 billion bridge loan that would be required to complete the transaction. In subsequent interviews Icahn said that Jefferies (LUK) had committed $1.6 billion from its own balance sheet and that Icahn himself would be willing to chip in upwards of $2 billion (if necessary). But no word yet on the remainder, and Dell's special committee is telling the activist investor that he needs to either put up or shut up. From its letter sent this morning:

"It is not clear to us whether you intend to formulate your transaction as an actual acquisition proposal that the Board could evaluate and potentially endorse or accept or rather to propose it as an alternative that the Board could consider in the event the pending sale to Silver Lake and Michael Dell is not approved. In order for the Special Committee of the Board of Directors of Dell to evaluate the transaction you have proposed and potentially negotiate terms which could cause it to constitute a Superior Proposal within the meaning of the pending Merger Agreement, we would need certain clarifications and additional materials."

In addition to financing sources, Dell's special committee also is asking Icahn for a formal purchase agreement (so far he only has submitted a letter of interest), the names of those he would place in senior management (he has said that Michael Dell wouldn't be CEO) and for commitment letters from other existing shareholders who would elect to take stub equity instead of $12 per share (Icahn needs a total of 20% to do so, under his formulation).

Dell's special committee also asks Icahn for post-closing liquidity plans, taking a not-so-subtle dig at his understanding of the company's financial needs:

"Please describe any contemplated arrangements to provide working capital or other liquidity following the closing.  Your proposal does not appear to take into account the additional borrowings that would seem to be required to address the liquidity needs that would result from the extent to which you would use the Company's cash in the transaction and the fact that you would sell accounts receivable, which would have the effect of reducing future cash flows.  In addition to working capital, the Company is likely to have other significant cash needs, such as approximately $1.7 billion of debt maturities within approximately 12 months after closing."

Should be interesting to see how Icahn responds to all of this, since it's basically Dell's special committee trying to call him on a bluff. There is an assumption by many that Icahn doesn't really have interest in buying the company, but rather is trying to squeeze a few extra dollars out of Silver Lake and Michael Dell -- an assertion Icahn disputed in a Friday interview with Fortune: "People are often very wrong when they try to perceive why we do what we do, but it serves my purposes. But, in this case, I can say that I'm trying to buy Dell, not yet another point or two on my shares."

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Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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