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Icahn seeks Dell share buyback, buys Southeastern stock

Investor Carl Icahn speaks at the Wall Street Journal Deals & Deal Makers conference at the New York Stock Exchange in this June 27, 2007 fi
Investor Carl Icahn speaks at the Wall Street Journal Deals & Deal Makers conference at the New York Stock Exchange in this June 27, 2007 fi

(Reuters) - Billionaire investor Carl Icahn promised Dell Inc shareholders that the company would buy back up to $16 billion of stock if they join his campaign to stop the computer maker from going private.

Time is running out for Icahn. Next month, the company's shareholders will vote on whether to accept a $24.4 billion bid from the company's founder, Michael Dell, and private equity firm Silver Lake, and so far shareholders' reaction to two of Icahn's proposals has been mixed.

Icahn has said repeatedly that Michael Dell's bid undervalues the company. In an open letter on Tuesday, Icahn gave his latest proposal to shareholders, asking them to vote in new directors who would in turn approve Dell buying back stock at $14 a share. Dell and Silver Lake are bidding $13.65 a share.

Southeastern, which had been the company's largest independent shareholders, sold nearly $1 billion of its Dell shares to Icahn at $13.52 apiece, making him the company's largest external investor. Southeastern and Icahn, which together hold about 13 percent of Dell's shares, had agreed not to sell their shares in the tender offer, Icahn wrote in his letter.

Dell could fund a tender offer with $5.2 billion of debt financing, $7.5 billion in cash available at Dell and $2.9 billion available through a sale of Dell receivables, leaving around $4.9 billion of cash available for ongoing Dell operations, Icahn wrote.

Dell's special board committee, which is looking at offers for Dell, said it was reviewing the latest "concept put forth" by Icahn but is not a transaction it could endorse or execute in its present form.

"There is neither financing, nor any commitment from any party to participate, nor any remedy for the company and its shareholders if the transaction is not consummated," the board said in a statement, adding that its previous request for information on Ichan's prior proposal was still outstanding.

Icahn's battle with the world's No. 3 PC maker has been acrimonious and protracted.

Dell suffered as the global PC industry has slowed. Michael Dell and the company's executives have argued that there is little future in PCs and the computer maker needs to transform itself into an IBM-like technology consultant for large companies - a makeover best done as a private company. Icahn, Southeastern, and other major investors say Dell's plan shortchanges stockholders and benefits mainly Michael Dell, who started the company from his college dorm in the 1980's.

A presentation by Dell's special committee on June 5 challenged Icahn, saying the activist investor is almost $4 billion short of the cash needed to fund his proposal for a $12-per-share special dividend.

But Icahn said on Tuesday that a major investment bank had indicated its willingness to make available $1.6 billion and that Icahn and his affiliates would provide $2 billion if necessary.

Icahn told cable television network CNBC on May 10 that investment bank Jefferies would contribute to the bridge loan needed to finance his deal.

By the reckoning of the board's special committee, Icahn's prior proposal did not factor in Dell's debt service, expected cash flow shortfalls and various termination and other fees related to the Michael Dell/Silver Lake deal.

In May, Icahn and Southeastern had proposed a deal that would gives shareholders $12 of cash for every share they own, and allow them to keep their stock. In March, Icahn offered $15 per share for 58 percent of Dell.

(Reporting by Nicola Leske; Editing by Lisa Von Ahn, Bernard Orr, Dan Wilchins)

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