adminIcahn and Blackstone put in preliminary bids late last week, potentially upsetting the plans of the No. 3 PC maker’s founder, Michael Dell, and private equity firm Silver Lake to take Dell private.
Icahn has offered US$15 per share for 58 percent of Dell, while Blackstone has proposed paying more than US$14,25 per share, the source said. The Silver Lake group has agreed to buy all of Dell for US$13,65 per share.
One issue before the special committee would be how to compare the three proposals. Both Blackstone’s and Icahn’s proposals envision that a portion of Dell’s stock will remain publicly traded, which raises questions about how that would be valued.
The source warned that the special committee of the board may decide to take longer to reach a decision. Blackstone and Silver Lake declined to comment. Dell and Icahn could not be immediately reached for comment.
The unexpected rival bids for Dell throw the future of the PC-maker into question. A “go-shop” period — during which the target company actively looks for rival offers — for a deal of this size rarely yields competing offers.
The bids now could potentially turn the sale of Dell into a three-horse race, which could drag out for months.
It also could threaten the future of Michael Dell, who founded the technology giant at the age of 19 with just US$1 000.
Under the Silver Lake plan, he planned to contribute his roughly 16 percent share of Dell’s equity to the deal, along with cash from his investment firm MSD Capital, and to remain CEO of the company.
Silver Lake is putting up US$1,4 billion in the deal. The Silver Lake group has no plans to increase or amend its offer until Dell’s special committee comes out with a ruling on the rival proposals, two sources close to the matter said late on Sunday. They said for now the buyout firm and Michael Dell planned to move forward with their current deal.
But the current plan to take the company private has come under attack from several high-profile Dell shareholders such as Southeastern Asset Management and T. Rowe Price. The shareholders have said his offer undervalues the company and pledged to vote against the deal, which requires a majority of shareholders, excluding the founder, to pass.
Brian Marshall, an analyst at ISI Group said in a report on Sunday that he did not expect the Silver Lake group to raise its offer meaningfully above the rival bids, “given significant challenges facing the PC business and a long transformation ahead”.
Dell’s shares closed at US$14,14 last Friday.
Under Icahn’s proposal, Dell shareholders will have a choice of electing cash or stock, but there would be a cap on the amount of cash they could get, the source said.
In other words, if all Dell shareholders chose to cash out, they could only sell 58 percent of their stock, retaining the other 42 percent that will remain publicly traded.
Icahn is being advised by investment bank Jefferies Group Inc. He plans to fund his bid with his own money, Dell’s cash as well as new debt, the source said.
The activist investor, who has taken a stake in Dell, earlier this month demanded Dell pay out US$15,7 billion in special dividends. He is no longer asking for that, the source said. Jefferies declined to comment.
Blackstone, which recently hired Dell’s former vice president of corporate strategy David Johnson, has offered to pay in excess of US$14,25 per share for Dell, the source said. — Reuters.
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