Dell fight sees clash of two capitalisms If there's something about giant contested buyouts that brings out the worst in human behaviour, then the fight that has broken out over the future of computer maker Dell is shaping up to be a battle for the ages. By pitting Carl Icahn, the Wall Street opportunist, against Michael Dell, one of the most successful technology entrepreneurs of the past three decades, it has also set up an intriguing showdown between two very different styles of capitalism. What is the deal for Dell No wonder the rhetoric surrounding Mr Dell's proposed $24.4bn buyout has been getting heated. Mr Icahn waded into the dispute this week with an announcement that he had acquired a "significant" stake in the struggling PC maker and objected to the terms of the buyout. He stands accused of riding a swelling wave of shareholder angst in order to squeeze more cash out of Mr Dell as his price of letting the deal go through. "He just thinks he can come and threaten and terrorise and leave with his tax," says one person close the buyout group. Another Dell supporter points out, with glee, that Mr Icahn's own numbers don't even appear to add up. In a letter earlier this week, he proposed to Dell's directors that they pay a special $9-a-share dividend funded from sources such as cash on hand and new borrowing that added up, instead, to $10.25 a share. "It's classic fuzzy math," this person said. Mr Dell, meanwhile, has been criticised by existing shareholders for highhandedly forcing them out of the company, leaving those who bought in to Dell's shares at a higher price with no choice but to take a loss. "What he should be doing is working for us," complained one big investor who objects to the deal. That may be distasteful for a billionaire, but that's just tough. If Mr Dell wasn't happy when his company's share price dropped below $9 late last year, then he should simply have gone into the market and bought more - not tried to force out investors with a $13.65-a-share offer, added Richard Pzena, head of Pzena Investment Management, another investor who objects to the deal. At the heart of the dispute is what to do with the PC maker's riches - its $6.4bn of net cash and $3bn of annual free cash flow, which could be used to pay the interest on a mountain of debt. Mr Dell and private equity firm Silver Lake have proposed using it to support a buyout that would leave them in full control. Mr Icahn, on the other hand, has backed an idea that has been gaining increasing popularity with some Dell investors: to use the cash and borrowings to pay out a large one-off dividend - he proposes $9 a share, or $16bn - and still leave existing investors with full ownership of a company that is starting to show signs of growing beyond its troubled PC roots. The same argument had already been pushed by Southeastern Asset Management, which, with an 8.4 per cent stake, is Dell's biggest outside shareholder. An alternative to this plan, according to one investor, would be to use the money to mount a massive stock buyback rather than pay a dividend, further concentrating ownership in the hands of the true believers who want to remain investors for the long term. The counterproposals in effect call Mr Dell's bluff. If the company can use up its cash and support the amount of debt he is proposing without leaving it fatally weakened, then why not go through the same process and remain public, letting everyone share in any upside? Backers of the buyout, on the other hand, argue that the public stock market has shown itself to be a hostile place for a company which, like Dell, is in the midst of a laborious turnround. The company's shares have been pushed down as it has made only slow progress and the market has worried about broader troubles for the PC industry. "That's nonsense," counters Mr Pzena. Who cares if the stock goes down? If it's uncomfortable to [Mr Dell], he should just buy more stock. Backers of the buyout, meanwhile, argue that investors who are prepared to show more enduring support for the company, placing a big and illiquid bet that locks them in for the next few years as Dell tries to complete its long-running turnround, deserve a premium over public shareholders. It is the potential size of that premium - and who should benefit from it - that has now been thrown into the spotlight. Wall Street, by pushing Dell's shares up to $14.24 by Friday morning, has sent a clear signal: that it expects the wrangle to add another $1 a share to a final deal, either because the buyout group will be forced to pay more or because a rival offer will emerge from a parallel exercise in which Dell is seeking other bids. One opponent of the buyout argues passionately that this is not all a storm over $1 a share. As it emerges in the coming years as a stronger business technology company, Dell will come to be seen as a far more valuable company, this person claims. A person close to the deal, on the other hand, counters that there is "not a cent more" to be paid: instead, the disclosures that Dell has already made about how it negotiated the buyout price show they have already squeezed out the last drop of cash. It sounds like a classic Wall Street negotiation - with plenty of high-stakes melodrama to come.