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* Icahn proposal "superior", some shareholders say
* Offers choice, stirs discussion, they say
* Some hope Michael Dell, Silver Lake will counter-offer
By Sam Forgione and Ross Kerber
NEW YORK/BOSTON, May 10 (Reuters) - Carl Icahn andSoutheastern Asset Management Inc have mounted an aggressivechallenge to Michael Dell's controversial $24.4 billion offer totake Dell Inc private, offering $21 billion in cash toshareholders while vying to wrest control of the company fromits co-founder.
Michael Dell, major shareholders such as Southeastern andbillionaire activist investor Icahn are waging a battle over thefuture of the world's third largest personal computer maker,once a tech-industry high flyer, but now struggling to evolve aspeople embrace smartphones and tablet computers.
Michael Dell and private equity firm Silver Lake want totake the company private for $13.65 per share, making it thelargest buyout since the 2008 financial crisis. But manyshareholders, including Southeastern and T. Rowe Price, complainthat offer severely undervalues the company.
Instead, Icahn and Southeastern, two of Dell's biggestshareholders, proposed a deal that gives shareholders $12 ofcash for every share they own, as well as allow them to keeptheir stock. Given that they retain their stake in the companyand that the rival offer is for $13.65 a share, every stockowned takes on a value of $1.65, Icahn and Southeastern argue.()
At $12 apiece, the cash portion of Icahn's and Southeastern's offer will come to $21 billion.
Should Dell's board rebuff them and put the go-private offerto a shareholder vote, the pair will nominate a slate of 12directors to challenge the current board. In an interview withCNBC on Friday, the activist investor said Michael Dell will nolonger run the company should his slate of candidates beelected.
The initial reaction from shareholders was favorable, thoughsome investors hoped the latest offer would prompt Michael Dellto offer a counter. David Moon, Chairman of Moon CapitalManagement in Knoxville, Tennessee, said his firm sold its Dellshares weeks ago and warned that failure to secure any sort ofdeal might send Dell's shares back to $10 a share, beforeMichael Dell's takeover offer.
Mario Gabelli, chief executive of Gamco Investors Inc, saidvia e-mail he would vote in favor of the latest proposal. OnTwitter, he wrote it was a "good alternative" to a leveragedbuy-out. Gabelli investment funds own about 5.2 million Dellshares, latest filings show.
"It's improvement. It gives people a choice. The other(proposal) comes across like a ramrod," said Donald Yacktman,founder and CEO of Yacktman Asset Management which holds 14.8million shares, according to Thomson Reuters data. "Whicheverway things evolve, what this is doing is forcing better capitalallocation than we have seen in the last five years."
On Friday, Icahn again suggested Michael Dell would be thebiggest beneficiary of his own proposed buyout, which wouldexclude current shareholders from participating in the fruits ofhis restructuring effort.
Icahn's offer "gives us the opportunity to continue ourparticipation in Dell's operating business and thus we believeit to be superior," said Tim Piechowski, associate portfoliomanager, Alpine Capital Research, St Louis, Missouri, whichowned 2.5 million shares as of May 10.
Dell shares were up 0.7 percent at $13.42 in late trade.
VISION
Icahn argued in a letter sent to Dell's board and madepublic in a filing on Friday that Dell operates a largeenterprise-focused computing business in addition to its ailingPC division, with strong ties Microsoft Corp and IntelCorp. Without specifying details, he also said costsavings could be had from merging assembly plants across theworld, while there remained opportunities to spin off non-corebusinesses.
That echoed Michael Dell's own strategic vision for acompany he hopes to transform from a purveyor of low-margin PCsinto a global provider of high-margin services for enterprises.
As for Southeastern, past filings show the fund managementfirm run by Mason Hawkins bought into Dell's shares at about$16.88, meaning a huge loss were they to accept a buyout.
Icahn told Reuters on Friday he will personally contribute acouple of billion dollars to finance a $5.2 billion bridge loanneeded to effect his deal. He added that he had already reachedout to several investment bankers. Later, he told CNBC in a TVinterview that one of those investment banks included Jefferies,which would contribute $1.6 billion to the loan.
Jefferies & Co declined to comment.
The Icahn and Southeastern challenge comes after BlackstoneLP ended its pursuit of Dell in April, and pulled out amonth after it teamed up with Icahn to challenge thetake-private attempt.
It was "insulting to shareholders' intelligence for theboard to tell them that this board only has the best interestsof shareholders at heart," Icahn and Southeastern said in theletter. "We are often cynical about corporate boards, but thisBoard has brought that cynicism to new heights."
Dell said in a statement on Friday that its specialcommittee is reviewing the Southeastern Asset materials and willprovide comment in "due course." A representative for SilverLake declined to comment.
"I don't think Icahn and Southeastern have enough sway overthe shareholders," Raymond James analyst Brian Alexander said."As Dell has a lot of cash, (the latest deal) is basically likea leveraged private equity deal, without the company goingprivate."
Both Icahn and Southeastern said they would take sharesrather than cash. They would finance the proposal from existingcash and about $5.2 billion in new debt.
Icahn and Southeastern together hold about 13 percent ofDell stock. The billionaire investor previously proposed paying$15 per share for 58 percent of Dell.
"As a shareholder, what I'm most pleased about is that thepot continues to be stirred," said Robert Willis, president andCEO of Willis Investment Counsel in Gainesville, Georgia, whichowns about 350,000 shares of Dell. "I like the fact that thosewho oppose this aren't going to lie down."
