Slide 1: Schedule 14A Proxy Statement
SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. __) Filed by the Registrant [ ] Filed by a Party other than the Registrant [x] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as
Slide 2: Notice of presentation to ISS and proxy solicitation legend
On June 24, 2013, Carl C. Icahn and affiliated entities presented the materials attached herewith as Exhibit 1 to Institutional Shareholder Services Inc. SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT AND OTHER DOCUMENTS RELATED TO THE SOLICITATION OF PROXIES BY CARL C. ICAHN, SOUTHEASTERN
Slide 3: Presentation to ISS Opposing the Proposed Dell Take-Private Transaction
Presentation to ISS Opposing the Proposed Dell Take-Private Transaction June 24, 2013
Slide 4: The Case for Protecting Stockholders at Dell
The Case for Protecting Stockholders at Dell • Evercore Partners, the advisor to the Board’s Special Committee, has reported to the board of Dell that, based on projections by the Boston Consulting Group, the advisor to Dell, Silver Lake could realize an average annualized rate of return of up to 44
Slide 5: Overview
Overview We believe the take-private transaction substantially undervalues Dell while superior alternatives exist. • Michael Dell and Silver Lake would not pursue a take-private transaction unless they thought it was a good deal for them Ø Silver Lake has delivered a gross IRR of 27% since inception
Slide 6: Dell's Strategic Rationale
Dell’s Strategic Rationale
Slide 7: Michael Dell's Contribution
Michael Dell’s Contribution Michael Dell returned to the CEO position on January 31, 2007. During his tenure, both Dell’s stock price and PC business have significantly underperformed. DELL Total Return vs. Peers Since Michael Dell’s Return Company Total Return Lenovo 141% IBM 113% EMC 74% ASUSTeK 2
Slide 8: Transformation Can Continue as a Public Company
Transformation Can Continue as a Public Company Dell’s own management consultant highlighted several public company transformations. Our Comments Apple’s market capitalization increased from a low of $1.7Bn in July ‘97 to a peak of $658Bn in September ‘12 as the company reinvented itself. Louis Gers
Slide 9: Dell's Strategic Rationale
Dell’s Strategic Rationale Dell’s own management consultant found little strategic rationale to take Dell private. Source: Boston Consulting Group 12/5/12 presentation to the Board. 7
Slide 10: Questions to Dell's Stockholders
Questions to Dell’s Stockholders • Do Dell’s owners need the Board or Michael Dell to protect them from the risks of an alternative transaction as proposed by Icahn and Southeastern(1), or do Dell’s owners need to protect themselves from an opportunistic purchase by Michael Dell and Silver Lake? • W
Slide 11: Ownership Interest of the Special Committee
Ownership Interest of the Special Committee The Dell Special Committee, which approved the proposed management buyout, does not have significant stock ownership. Special Committee Ownership • Special Committee only owns an aggregate of 203,367 shares Total Beneficial Ownership Alex Mandl 133,127 • T
Slide 12: Opposition to the Management Buyout Offer
Opposition to the Management Buyout Offer Other significant investors have publicly stated their unhappiness with the proposed management buyout and are very capable of evaluating any potential long-term risks of the business. Stated Opposition % of Public % of Shares Shares in Float(1)(2) Outstandi
Slide 13: The Case for Dell's Future
The Case for Dell’s Future 11
Slide 14: It is Not About the PC
It is Not About the PC … Dell’s long-term stockholders have funded the Company’s turnaround and we strongly believe they should be given the opportunity to benefit from their investment. • It is not about the PC… it is not about the PC… Value of Recent Transactions it is not about the PC… Non-PC acq
Slide 15: Dell's Acquisitions
Dell’s Acquisitions “The acquisitions we've made over last three years, the compound growth rate associated with those over that time period has been greater than 90%. So there is no question to not only do we get the revenue from the acquired entity, but our success today in investing in those asse
Slide 16: Enterprise Solutions is the Future
Enterprise Solutions(1) is the Future In our opinion, Michael Dell and his partners at Silver Lake want to capture the upside of the Company’s recent strategic investments and growth initiatives in Enterprise Solutions. • In Q1, Enterprise Solutions accounted for 65% of segment operating income: Ø E
Slide 17: Cost Cutting Opportunities Identified
Cost Cutting Opportunities Identified Boston Consulting Group estimates that the Company could realize up to $3.35 billion in cost savings which would drive meaningful margin expansion. Source: Evercore Partners 2/4/13 presentation to the Board. 15
Slide 18: Positioning for Long-Term Profitability
Positioning for Long-Term Profitability Dell’s recent aggressive PC pricing strategy is designed to buy meaningful market share while sacrificing near-term margins - a strategy that will benefit future owners. Management Quotes from Recent Earnings Call “We continued to face a competitive pricing en
Slide 19: Our Dell Valuation Model
Our Dell Valuation Model We believe the $13.65 merger consideration substantially undervalues the Company even when using depressed results from FQ1’14 as our base. Icahn/SAM Calculated Segments as % of Operating Value Calculated Value Value Per Share (In MM) Servers & Networking $ 8,007 0.75x Sales
Slide 20: Illustrative EPS of a Potential Dell Self Tender (1/2)
Illustrative EPS of a Potential Dell Self Tender Alternative(1) Using Various Earnings Assumptions (1/2) A Dell self tender would be highly accretive and result in pro forma EPS significantly higher than current levels. Illustrative Example: 1,118MM Shares Tendered Earnings Case Assumed Adjusted Las
Slide 21: Illustrative EPS of a Potential Dell Self Tender (2/2)
Illustrative EPS of a Potential Dell Self Tender Alternative(1) Using Various Earnings Assumptions (2/2) Assuming only half of the $3,350MM cost opportunity identified by the Boston Consulting Group would further increase EPS. Illustrative Example: 1,118MM Shares Tendered Earnings Case Assumed Adjus
Slide 22: Reasonable Utilization of the Balance Sheet
Reasonable Utilization of the Balance Sheet Icahn and Southeastern’s Dell self tender proposal(1) could comfortably be financed utilizing Dell’s balance sheet. • Under the Michael Dell/Silver Lake Proposal, the Net Debt/EBITDA multiple is approximately 3.7x(2) • Under Icahn and Southeastern’s Dell s
Slide 23: Long-Term Potential
Long-Term Potential Boston Consulting Group’s cases illustrate Dell’s long-term potential. BCG Base Case $Bn Fiscal Year 2014 2015 2016 2017 Revenue $56.4 $55.5 $55.1 $54.3 Gross margin 12.9 12.6 12.5 12.3 Non-GAAP Operating Income 3.4 3.3 3.2 3.0 BCG 25% Base Case Fiscal Year 2014 2015 2016 2017 Re
Slide 24: Stock Price Capped by Merger Consideration
Stock Price “Capped” by Merger Consideration Dell’s Special Committee may have obtained a 37% premium for stockholders, but the nearest comp has appreciated almost 65% over the same period(1). 37% 64% Source: FactSet. Source: FactSet. DELL HPQ 90-Day Trading Average(1) $9.97 90-Day Trading Average(1
Slide 25: There is No Premium for Long-Term Stockholders
There is No Premium for Long-Term Stockholders Claiming a 37% premium is insulting to long-term stockholders. 5 Year High: $ 30.60 124% Above the Offer 2 Year High: $ 18.32 34% Above the Offer Take-Private Offer: $ 13.65 37% Premium 90-Day Average Trading Price: $ 9.97 Source: FactSet. Percentage ov
Slide 26: Dell's Sale and Governance Process
Dell’s Sale and Governance Process
Slide 27: Go-Shop With Impediments to Value Maximization
Go-Shop With Impediments to Value Maximization In January 2013, the Special Committee was educated on factors maximizing the impact of a go-shop process by Evercore Partners. Factors Impacting a Go-Shop Process and the Action Taken by Dell’s Special Committee A longer go-shop period increases the am
Slide 28: Go-Shop Processes are Rarely Successful
Go-Shop Processes are Rarely Successful A go-shop provision often provides cover for a pre-chosen deal, especially when management is involved. • A go-shop process is supposed to operate as “The data does indicate some a post-signing “market-check” that helps fulfill reason to be wary [of Go-Shops]
Slide 29: Efficacy of Go-Shop Provisions
Efficacy of Go-Shop Provisions Source: Evercore Partners 1/18/13 presentation to Board. 27
Slide 30: Impediments and Deal Protections
Impediments and Deal Protections The Special Committee agreed to a suite of deal protection measures that significantly handicap a third-party’s ability to pursue an alternative transaction, especially one where existing stockholders have the choice to receive cash or participate in the Company’s fu
Slide 31: Dell's Stockholders Deserve Better
Dell’s Stockholders Deserve Better Stockholders have the power to demand and receive more. • If the Michael Dell/Silver Lake transaction is rejected: 1) It can be amended 2) The Board can (and, in Icahn and Southeastern’s opinion, probably would) explore the many alternatives to the Michael Dell/Sil
Slide 32: Conclusion
Conclusion Dell’s owners should reject the Michael Dell/Silver Lake transaction and force Board exploration and pursuit of an alternative transaction that would enable Dell’s existing owners to reap the benefits of their multi-year investment in Dell’s transformation - the value that Michael Dell an
Slide 33: Appendix
Appendix
Slide 34: Source: FactSet as of 6/21/13
Source: FactSet as of 6/21/13.
Slide 35: Derivation of Servers & Networking Multiple
Derivation of Servers & Networking Multiple Servers & Networking A 5-year discounted cash flow model using the following assumptions yields a value of approximately 0.75x revenues: Assumptions: Annual Revenue Growth: 3.0% Gartner's forecasted worldwide server market revenue CAGR through 2017 as of 6
Slide 36: Important Disclosure Information
Important Disclosure Information SPECIAL NOTE REGARDING THIS PRESENTATION THIS PRESENTATION INCLUDES INFORMATION BASED ON DATA FOUND IN FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, INDPENDENT INDUSTRY PUBLICATIONS AND OTHER SOURCES. ALTHOUGH WE BELIEVE THAT THE DATA IS RELIABLE, WE HAVE NOT