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Icahn sweetens bid for Dell by adding warrants

Investor Carl Icahn speaks at the Wall Street Journal Deals & Deal Makers conference, held at the New York Stock Exchange, June 27, 2007. RE
Investor Carl Icahn speaks at the Wall Street Journal Deals & Deal Makers conference, held at the New York Stock Exchange, June 27, 2007. RE

By Nicola Leske and Poornima Gupta

(Reuters) - Billionaire investor Carl Icahn and Southeastern Asset Management Inc sweetened their takeover bid for Dell Inc on Friday, adding warrants they said would increase the offer to a range of $15.50 to $18.00 per share from $14.00.

The move is Icahn's latest effort to block a $24.4 billion buyout offer, of $13.65 per share, from company founder Michael Dell and private equity firm Silver Lake.

Under the new offer from Icahn, Dell shareholders would get $14.00 per share and a warrant for every four shares held. The warrant would entitle the holder to buy Dell shares for $20.00 each within the next seven years.

In June, Icahn and Southeastern proposed to buy back 1.1 billion shares at $14 apiece.

Dell's special board committee said it was reviewing Icahn's latest offer and is willing to meet him to discuss his various proposals.

"It is critical that Dell shareholders not be distracted from the clear choice they must make next week - take $13.65 per share in cash or bear the risks of continuing to hold their Dell shares," it said in a statement.

Icahn wants shareholders to vote against the buyout and then ask a court in Delaware, where Dell is incorporated, to appraise the fair value of the shares.

Dell shareholders will vote on the offer July 18. Dell's shares closed down 0.18 percent at $13.32, reflecting a lack of enthusiasm for Icahn's new offer.

King She, a special situations analyst for Susquehanna Financial Group, said he believes the current value of a warrant issued at Icahn's terms is around $2 to $3.75, and values Icahn's proposal at $13 to $15 per share.

"If Icahn was such a great alternative, you would have thought that Dell's share price would have gone higher," he said. "That tells me that people may not be so positive about Icahn's proposal in general."

Susquehanna Financial Group is a market maker for Dell.

To complicate matters, unless Dell's special board changes its recommendation, any proposal from Icahn will be put to shareholders only if the offer by Michael Dell and Silver Lake is not accepted by shareholders when they meet on July 18.

"The Icahn offer today is a slight improvement but not much," said one investor, adding that he would like the founder to improve his bid.

The investor, who wished to remain anonymous, said Dell's special board committee began losing credibility after it began releasing increasingly dire forecasts for Dell's business.

"It made them look biased," said the investor, who declined to reveal if he would vote for Michael Dell's offer.

Many large shareholders - including Highfields Capital Management, Pzena Investment Management and Yacktman Asset Management - have said they will vote against the Michael Dell-Silver Lake offer because it undervalues the PC maker.

Michael Dell has said the company's shift from a computer maker to a provider of enterprise computing services is best done away from public scrutiny.

(Reporting by Poornima Gupta in San Francisco; Supantha Mukherjee in Bangalore and Nicola Leske in New York; Editing by Saumyadeb Chakrabarty, Gerald E. McCormick and Richard Chang)

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