special committee of Dell Inc's board is evaluating separate takeover
proposals from Blackstone Group and billionaire investor Carl Icahn to
decide whether either or both are likely to trump an existing $24.4
billion take-private deal, a source familiar with the discussions said on
Icahn 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 $15 per
share for 58 percent of
Dell, while Blackstone has proposed paying more than $14.25 per
share, the source said. The Silver Lake group has agreed to buy all of
Dell for $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
Dell could make an
announcement as soon as Monday about whether either of the rival offers
were reasonably likely to lead to a superior bid, the source said. But the
source warned that the special committee of the board may also decide to
take longer to reach a decision.
Blackstone and Silver Lake
declined to comment. Dell and Icahn could not be immediately reached for
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 $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 $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
that his offer undervalues the company and pledged to vote against the
deal, which requires a majority of shareholders, excluding the founder, to
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
Dell's shares closed at
$14.14 on 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
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 $15.7
billion in special dividends. He is no longer asking for that, the source
Jefferies declined to
Blackstone, which recently
hired Dell's former vice president of corporate strategy David Johnson,
has offered to pay in excess of $14.25 per share for Dell, the source
The New York-based
alternative investment firm has not specified a range of the bid, but has
two other equity partners - Francisco Partners and Insight Venture
Francisco and Insight
could not be reached immediately for comment.
proposal, Dell also would have a certain amount of stock publicly traded,
the source said. But unlike the Icahn proposal, Blackstone has proposed
buying out any shareholder that wants to cash out of Dell.
Instead, Blackstone is
proposing to cap the amount of stock that would be outstanding in the
publicly traded equity stub, the source said, adding that the private
equity firm has not specified what that cap is.
Blackstone is being
advised by Morgan Stanley, which has also given it a highly confident
letter of financing, the source said.
Morgan Stanley declined to
There have also been some
conversations about the Blackstone group selling Dell's financial services
business, but that is not part of the current proposal, the source said.
Dell was regarded as a
model of innovation as recently as the early 2000s, pioneering online
ordering of custom-configured PCs and working closely with Asian component
suppliers and manufacturers to assure rock-bottom production costs.
But as of 2012's fourth
quarter, Dell's share of the global PC market had slipped to just above 10
percent from 12.5 percent a year earlier as its shipments tumbled 20
percent, according to research house IDC.
Michael Dell returned to
the company as CEO in 2007 after a brief hiatus, but has been unable to
engineer a turnaround thus far. Dell's focus on corporate computing in
recent years has yet to yield results, critics note.
against incumbents, including IBM and Hewlett-Packard, will not be easy no
matter what the corporate structure.
A source earlier said that
Dell had slashed its internal forecast for fiscal 2013 operating profit to
about $3 billion - down sharply from the $3.7 billion it had predicted
previously. The source added that more details will be revealed in a proxy
filing which is expected by the end of this week.
Meanwhile, if the special
committee of the board decides that either - or both - of the rival bids
for Dell are reasonably likely to lead to superior offers, Icahn and
Blackstone will have to present firm bids for Dell. The negotiations are
likely to take weeks, the source said.
At that point, the special
committee will again need to decide whether the firm bids from Icahn and
Blackstone, which include features such as committed financing, were
superior to the Silver Lake-Michael Dell agreement.
If they are superior,
Silver Lake and Michael Dell will get one shot at revising their original
bid. Unlike most other go-shop processes, where the original bidders get
several chances to match rival bids, Dell has given its founder and Silver
Lake the right to do so only once.
(Reporting By Paritosh
Bansal and Jessica Toonkel; additional reporting by Nadia Damouni and Greg
Roumeliotis; Editing by Theodore d'Afflisio and Stephen Coates)