Dell Board Said to Expect Offers From Blackstone, IcahnJeffrey McCracken
Dell Inc.’s board and advisers were expecting to receive takeover offers from Blackstone Group LP and activist Carl Icahn, though no proposals had been received a few hours before yesterday’s bid deadline, said two people familiar with the matter.
Dell isn’t planning to announce whether it got any bids until March 25, even though the deadline for topping the existing Silver Lake Management LLC-led $24.4 billion leveraged buyout was yesterday, said the people, who asked not to be identified as the process is private. Dell’s board or its advisers had been speaking with Blackstone and the talks led Dell to expect a higher proposal, the people said. Icahn could also put in a proposal before the deadline, one person said yesterday, speaking before it expired.
Blackstone, a private-equity firm, was considering whether to try to top a proposal from Chief Executive Officer Michael Dell and Silver Lake to take the computer maker private for $13.65 a share, people with knowledge of the matter said.
Dell’s board was seeking alternate bids under a so-called go-shop period that ended at midnight on March 22.
A spokesman for the Dell special committee didn’t return calls or e-mails seeking comment. David Frink, a spokesman for Round Rock, Texas-based Dell, declined to comment. Peter Rose and Christine Anderson, spokesmen for Blackstone, didn’t respond to phone calls and e-mails seeking comment. A call to Icahn’s office wasn’t returned.
Unless another bidder emerges, Michael Dell, the computer maker’s largest shareholder, and Silver Lake will be left to seek support for a bid that has been criticized as too low by the company’s biggest outside investors.
Southeastern Asset Management Inc. and T. Rowe Price Group Inc. have said they will vote against the buyout, while billionaire Icahn wants Dell to pay a special dividend of $9 a share if the deal fails. He has said that he’ll start a proxy fight to put up his own board candidates if Dell refuses.
To go forward, the deal requires the support of more than half of the company’s investors, excluding Michael Dell, who has a 15.6 percent stake.
The buyout is Michael Dell’s attempt to take back majority control of the company he started in 1984 in a University of Texas dormitory, after struggling to equip the PC maker for a new generation of competitors in mobile and cloud computing. He’s betting that he can more effectively transform Dell into a provider of a broad range of products and services for corporations outside the scrutiny of public investors.
Blackstone had explored making a bid with private-equity firm TPG Capital and tech investment fund Francisco Partners, said two people familiar with the matter.
The Blackstone plan also envisioned a sale of the Dell Financial Services business either to General Electric Co. or another bidder, said these people. Proceeds from that asset sale, in tandem with a buyout offer, would help fill the equity hole for a bid, said one of these people.
Blackstone has spoken to Southeastern to see if the firm would be interested in rolling in its stake, said these people. One proposal considered would have included a so-called public stub to allow both Icahn and Southeastern to invest in the Blackstone bid, said these people.
Dell’s special committee began to take a Blackstone bid more seriously as the week wore on, said these people. By yesterday afternoon, the board and its advisers expected a bid, said one of them.
Hewlett-Packard Co. and Lenovo Group Ltd. also reviewed Dell’s records, people familiar with the matter said.
Dell had last year privately forecast $5.6 billion in operating income for 2014, a figure that is now going to come in around $3 billion, said one of these people. That rapid fall could jeopardize the bank loans for Silver Lake, said this person, if the lenders on the deal made their financing commitment based on the higher numbers.
Dell was unchanged at $14.14 at the close in New York on March 22. The shares have climbed 5.4 percent since Feb. 5, when the Silver Lake proposal was disclosed, amid speculation that another bid might be forthcoming.