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Carl Icahn and Southeastern Asset Management think that Dell shares are worth $23 (U.S.), and that founder Michael Dell's proposed buyout, at $13.65, is grossly unfair. There is an easy way for Mr. Dell to silence the activists: take them at their word. He should simply offer to sell them his 276 million shares at $18 apiece. That is a 20-per-cent discount to the agitators' value, leaving them lots of upside, by their own reckoning.
They can then figure out how to lever a declining business to the hilt to effect a huge cash dividend, and then turn that business around in the glare of the public markets (have you noticed how well that last part is working out at J.C. Penney?).
If the gadflies accept Mr Dell's offer – at a price one-third above what he thinks the company is worth – he can take his payment ($3.2-billion or so, after taxes) and join the philanthropy circuit full time.
The valuations being thrown around are all theoretical. The market price, before deal rumours began, was about $10, cash included. Markets are often wrong; they are rarely off by 150 per cent. It stings to only get $13.65 for a stock you paid 17 bucks for, as Southeastern reportedly did. But sunk costs are just that – sunk.
Investors (if there are any left besides Southeastern, Mr Icahn, and a bunch of merger arbs) should think carefully about where they will land, should the buyout offer collapse under the weight of the controversy.