Dell board to continue talks with Icahn and Blackstone

New York TimesMarch 25, 2013 

The bidding war over Dell is heating up.

On Monday, the company’s special board committee said the two alternative preliminary plans recently submitted by the private equity firm Blackstone Group and the activist investor Carl C. Icahn could result in “superior proposals” to the current offer on the table by the company’s founder, Michael S. Dell, and Silver Lake Partners.

Both Icahn and Blackstone have submitted proposals valued at more than $13.65 a share, the current offer.

With the new preliminary offers, the committee, which is overseeing the sale process, will continue negotiations with the two rival bidders. Both plans are preliminary, so any firm bids are likely weeks away.

“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.” Alex Mandl, the chairman of the special committee, said in a statement. “We intend to work diligently with all three potential acquirers to ensure the best possible outcome for Dell shareholders, whichever transaction that may be.”

The negotiations set up a three-way battle over Dell, the embattled computer maker.

Early last month, Dell and Silver Lake offered $13.65 a share for the company, which has struggled in the face of the rising competition. The buyout, the suitors said, would help the Dell transform its business away from the glare of the public markets.

But several big shareholders balked at the bid, saying it undervalued the company and would saddle it with too much debt. Southeastern Asset Management, Dell’s largest outside shareholder, said the computer maker was worth closer to $24 a share. Icahn also entered the fray, amassing a sizable stake in Dell.

During the 45-day go shop period, several big companies signed nondisclosure agreements, taking the opportunity to peek at Dell’s books. With the deadline looming, Blackstone and Icahn emerged as potential bidders.

Both players are taking a different tack than Michael Dell and Silver Lake. Rather than taking Dell completely private, their deals would leave a piece of the company public through what’s known as a stub, which would allow shareholders to maintain a stake.

Blackstone is proposing a bid of more than $14.25 a share, in conjunction with two technology investment firms, Francisco Partners and Insight Venture Partners. It did not indicate what percentage of the company would remain public, but shareholders would have the options to sell their entire stakes.

Icahn is laying out a bid of $15 a share for about 58 percent of the company. As such, shareholders would be allowed to sell only some of their holdings. Under the proposal, Icahn would have a 24.1 percent stake in the company, Southeastern would have 16.6 percent and another major investor, T. Rowe Price, would have 9.3 percent.

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