Dell confirms buyout offers from Icahn and Blackstone

March 26, 2013 | 09:54
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A bidding war broke out Monday for US computer maker Dell as two new acquisition offers emerged in competition with the private buyout led by founder Michael Dell.

photo: AFP

The company said the offers were from billionaire corporate raider Carl Icahn and investment fund Blackstone Group.

Both proposals "could reasonably be expected to result in superior proposals," but further study is needed, Dell said in a statement.

Dell said its special committee, which had set a Friday deadline, would continue negotiations on both offers.

"We are gratified by the success of our go-shop process that has yielded two alternative proposals with the potential to create additional value for Dell shareholders," said special committee chairman Alex Mandl.

"We intend to work diligently with all three potential acquirers to ensure the best possible outcome for Dell shareholders."

The new offers suggest Dell could bring a higher value that the US$24.4 billion proposed in the initial buyout offer, analysts said.

The initial offer amounted to US$13.65 per share, but Brian White at Topeka Capital Management said bids could go considerably higher.

"With three forces at work, we believe a higher buyout bid is in the cards and we continue to believe that a US$18 (per share) buyout price for Dell makes sense; however, it is unlikely that this price level will occur in the first round of bidding," White said in a note to clients.

Roger Kay, analyst with Endpoint Technologies, said the new bids suggest Dell and other firms may have been unfairly punished by the stock market, amid gloomy predictions about a shift away from traditional computers.

"Tech companies, despite their troubles, are pretty good companies," Kay said.

"They sell a lot of products. They have pretty good cash flow. You can argue there is a lot of value there. It's true that a lot has shifted over to high mobility, but it's not like the PC market has gone away."

Kay said there was also "some suspicion about Michael Dell seeing things that others don't because he's in the driver's seat."

But Kay noted that, with the new offers, "Michael Dell could lose his job, which is the exact opposite of his intention when he started out" with the buyout.

In February, the company unveiled plans to go private in a private equity buyout led by founder Dell, backed by equity investment firm Silver Lake and a loan from Microsoft.

According to the details released Monday, Blackstone proposed a "leveraged recapitalization" which would offer existing shareholders $14.25 per share but allow those who want to hold onto the shares to be able to do so.

Under the deal, shares would remain publicly traded on the Nasdaq.

Blackstone said its offer "will deliver significantly greater value to your shareholders" and provide "a leveraged upside" for those seeking to hold onto their shares.

The Icahn offer would inject an additional $5 billion into Dell, paying $15 per share, allowing the company to remain publicly traded but under new control.

The existing shareholders would have their shares rolled over into a new company, with Icahn controlling 24.1 percent, Southeastern Asset Management 16.6 percent and T. Rowe Price 9.3 percent.

The two investment firms had opposed the initial buyout offer.

The initial offer led by Michael Dell would de-list the company from stock markets and could ease some pressure on Dell.

The company is cash-rich but has seen profits slump as it tries to reduce dependence on the shrinking market for personal computers.


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