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Icahn, known for shaking up management of the companies in which he invests, wrote to Dell's board to propose a leveraged recapitalization and said that the $24.4 billion go-private deal "substantially undervalues the company".
In the letter, dated March 5 and published on Thursday in a statement by the Special Committee of the Board of Directors of Dell, Icahn said his interests held a substantial stake in Dell. He did not disclose his exact shareholding.
CNBC, citing unnamed sources, reported on Wednesday that Icahn had accumulated about 6 per cent of Dell's shares. That would make him the third-largest shareholder after Southeastern Asset Management and Michael Dell himself, based on available data.
Southeastern Asset Management, run by activist investor Mason Hawkins, also opposes the deal. It has said Dell could borrow money to make a major share repurchase, or break up the company and sell off its units separately. Icahn proposed a special dividend of $9 per share, which would include $4.26 per share derived from $5.25 billion in new debt.
He said the special dividend, when added to a "stub" value of $13.81 per share, would deliver a total value of $22.81 per share to shareholders �" a 67 per cent premium to the go-private deal.
Dell said that Icahn had asked its board to commit to his proposal, in case the go-private deal is voted down by shareholders, to "avoid a proxy fight".
"We see no reason that the future value of Dell should not accrue to ALL the existing Dell shareholders �" not just Michael Dell," Icahn wrote in the letter.
Michael Dell, who has teamed up with private equity firm Silver Lake and software maker Microsoft, is offering $13.65 a share to buy out the company.
Dell shares closed at $14.32 on the Nasdaq on Wednesday and were marginally higher before the bell on Thursday.
Dell said it would welcome Icahn's participation in a "go-shop" process to find alternative proposals, which the company announced on Wednesday.
Icahn said that if his ideas were not accepted he would propose directors who would implement his plans.
He requested that the Dell board combine the vote on the go-private transaction with an annual meeting to elect a new board of directors.
Dell has said it would hold the meeting for the vote on the go-private deal in June or early July.
If the board were to decline to combine the vote, Icahn said he anticipated "years of litigation will follow challenging the transaction and the actions of those directors that participated in it".
Icahn Enterprises LP would provide a $2 billion bridge loan for the "prompt payment" of the dividend, if his slate of directors was elected, Icahn said in the letter.
Icahn himself would provide an additional $3.25 billion bridge loan to Dell if necessary, he wrote.
