Icahn & Blackstone Make Preliminary Bids for Dell

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On Saturday, billionaire Carl C. Icahn and The Blackstone Group sent preliminary deal proposals to Dell, Inc., according to people briefed in the matter.  One of these people said, that the letters sent late Friday night are meant to keep the negotiations going with the special committee of Dell’s board.  The proposals will be reviewed by the special committee to determine if either or both offers have the potential to lead to an acceptable bid.    

The last 45 days have been spent trying to find alternatives to the offer from Michael Dell and private equity firm, Silver Lake of $24.4 billion. 

Working with the investment firms Francisco Partners and Insight Venture Partners, Blackstone proposed an offer of more than $14.25 per share.  The proposal include the opportunity for existing shareholders to remain investors in the computer company, through what is known as a public stub, or to sell off their entire holdings, if they wish to do so.  The size of the potential public stub was not disclosed by Blackstone. 

Icahn has proposed a plan to buy approximately 58 percent of the company at $15 per share.  His proposal allows shareholders to sell only a portion of their shares. 

Both Blackstone and Icahn are highly confident about raising the capital to finance the deal, even though neither of the companies gave any specific details about financing. 

Hewlett-Packard and Lenovo, both of which were invited to participate in the go-shop period of the deal, were dismissed as potential buyers long ago and instead were seen as only looking at Dell’s books. 

A Dell spokesman declined to comment. 

This emergence of potential competitors bidding for Dell should help increase the cost of this deal.  Shareholders have been concerned the Michael Dell bid was too low.  Southeastern Asset Management and T. Rowe Price, the biggest Dell investors have already said they are not going to accept the current price offer of $13.65 a share. 

After assuming a substantial stake in Dell, Icahn told its special board that he is opposed to the current transaction as well and would prefer to pay out a special dividend instead.  Last week, he agreed to take part in the evaluating process. 

On Friday, indicating that investors are expecting a higher takeover offer, Dell shares closed at $14.14, unchanged. 

Blackstone has been talking to prospective partners, TPG Capital, General Electric’s GE Capital, and Southeastern over the past weeks.  Should Michael Dell decide to step down, Blackstone has also been talking to executives like Mark V. Hurd (president of Oracle Corporation) to serve as chief executive of Dell.   David Johnson, who is a former Dell in-house deal maker, is leading Blackstone’s efforts. 

However, there are still hurdles that Blackstone faces.  Arranging the large amount of financing needed, is one of the hurdles.  In addition, Michael Dell is not obligated to strike any agreements with the rivals on their terms, even though he’s agreed to talking with them. 

Source: www.dealbook.nytimes.com

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