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Icahn builds Dell stake, complicating buyout: Report

Outspoken activist investor Carl Icahn is known for shaking up management.

CHIP EAST/REUTERS

Activist investor Carl Icahn has built a stake that was likely around 100 million shares in Dell Inc. and wants the personal computer maker to conduct a leveraged recapitalization, complicating founder Michael Dell's effort to take the company private, CNBC reported.

Mr. Icahn, who is known for shaking up management, has accumulated a stake in Dell representing 6 per cent of the company, CNBC said on Wednesday, citing sources familiar with the investment.

The network reported that Mr. Icahn wanted Dell to take on debt of as much as $9-billion (U.S.) and pay out a special dividend to shareholders.

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Shares of Dell closed almost 1.8-per-cent higher at $14.32 (U.S.)

The investor was not immediately available for comment.

Mr. Icahn's arrival on the scene typically puts companies – and their boards – on guard, because the outspoken activist investor has a reputation for aggressively demanding changes by building up stakes in target corporations.

Michael Dell has struck a deal to take private the No. 3 personal computer maker he created in a college dorm room in 1984 and is partnering with private equity house Silver Lake and Microsoft Corp. But the $24.4-billion deal is being opposed by some of Dell's major shareholders, including Southeastern Asset Management, which said the deal substantially undervalued the company.

Southeastern has considered whether to team up with another firm to attempt a counter bid to Michael Dell's deal, The Wall Street Journal said, citing people familiar with the matter.

Southeastern has demanded on Tuesday that Dell open its books, signalling it could become more active in opposing the offer.

A special committee of Dell's board of directors said earlier on Wednesday the pending sale of the PC maker was the best alternative for shareholders, despite opposition from its largest outside shareholder.

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The committee, which had been analyzing Dell's situation for more than five months, said in a statement on Wednesday that it had "negotiated aggressively" to ensure shareholders got the best possible value in agreeing to founder Michael Dell's $13.65 per share offer to take the company private.

Other alternatives the special committee said it looked at besides a sale included a leveraged recapitalization, changing the dividend policy, selling parts of the business and working with the company's current business plan.

The committee said that investment bank Evercore Partners Inc. is still soliciting potential alternative proposals in a process that ends March 22.

Mr. Icahn, a billionaire investor who made his name in the 1980s with the hostile takeover of TWA, is known for his colorful speech - as during his now-infamous, expletive-ridden on-air spat with fellow Wall Street player Bill Ackman over the future of Herbalife. He is also famous for waging fierce battles with company management over what he perceives as the right corporate strategy.

Some of his recent battles include an effort to take over truck and military vehicle OshKosh Corp. that he ultimately abandoned, and campaigning for a higher dividend payout from oil services firm Transocean Ltd.

Beyond tender offers and buying up shares on the public markets, the investor has also resorted to lawsuits, as in a long-running battle with Hollywood studio Lions Gate Entertainment Corp.

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More recently, Mr. Icahn chalked up a massive gain after buying a near 10-per-cent stake in Netflix Inc. in September, when he stated flatly that there were interested buyers for the movie-streaming service waiting in the wings - which have not emerged.

Shareholders representing almost 14 per cent of Dell shares, led by Southeastern with a stake of more than 8 per cent, including options, have said they will vote against the proposed buyout. The third largest shareholder, T. Rowe Price, has also spoken out against the deal.

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