Blackstone, Icahn proposals may exceed founder’s buyout bid, Dell says

March 25, 2013

Dell said it got proposals from Blackstone Group and Carl Icahn that may be superior to Michael Dell’s $24.4 billion buyout plan, putting pressure on the founder to sweeten his terms or switch allegiances.

Blackstone’s plan values Dell at more than $14.25 a share, while Icahn would pay $15 a share in cash for as much as 58.1 percent of the stock, Dell said Monday in a statement that included their offers. Under both plans, some shares may continue to be publicly traded. Michael Dell, who proposed $13.65 a share, is willing to work with third parties on the alternative plans, the company said.

The challenges to the original bid, which came as Dell struggles to catch up with a new wave of nimbler competitors in mobile computing and business services, mean Michael Dell could lose control of the firm he founded in his Texas dorm room in 1984. His plan, backed by partner Silver Lake Management, was to retool Dell as a maker of data-center gear and software for corporations — without the scrutiny of public investors.

“Blackstone and Icahn are financial buyers, not ego buyers, and their name isn’t on the door, so they won’t stay in a bidding war that requires them to overpay,” said Erik Gordon, a business and law professor at the Stephen M. Ross School of Business at the University of Michigan in Ann Arbor.

Dell rose 2.6 percent Monday to close at $14.51, 6.3 percent above Michael Dell’s offer.

Blackstone is proposing a leveraged recapitalization transaction. Investors could choose to get either all cash or equity, subject to a cap, if they want to stay invested in Dell. The shares would continue to be publicly traded.

Blackstone, which has teamed up with Francisco Partners, a San Francisco-based technology-oriented buyout shop, and New York-based venture firm Insight Venture Partners, said it plans to fund the transaction with a combination of equity and debt financing, in addition to using Dell’s cash and equivalents. Blackstone said it held discussions with some of Dell’s largest shareholders and plans to invite them to join the transaction.

Morgan Stanley, which is working with Blackstone to lead financing, has issued a letter saying that it’s “highly confident” that Blackstone will obtain financing. Other parties have “indicated a strong interest” in helping finance the deal, Blackstone said.

Icahn is offering shareholders the option to roll over their stakes or receive $15 a share in cash, with the amount of cash limited to $15.65 billion, according to the statement. Icahn has enlisted Jefferies to conduct due diligence.

Icahn’s offer assumes that Southeastern Asset Management and T. Rowe Price Group, among the largest Dell investors after Michael Dell, would contribute their stakes and won’t receive a cash payment.

Alexander F. Yuan

AP

Dell said it got proposals from Blackstone Group and Carl Icahn that may be superior to Michael Dell’s, above, $24.4 billion buyout plan, putting pressure on the founder to sweeten his terms or switch allegiances.

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