Alternate deal for Dell?


Recently we wrote about the plan that Dell founder Michael Dell has for taking the company private and some of the backlash he’s facing from current investors about the offer price.

But Sunday, details about additional offers for the computer maker emerged, setting up a three-way race for control.

Here’s the story from the New York Times:

The Blackstone Group and the billionaire Carl C. Icahn have sent preliminary deal proposals to Dell Inc., people briefed on the matter said on Saturday, signaling that a potential three-way race for control of the computer company is underway.

The letters by Blackstone and Mr. Icahn, sent late Friday night, were meant to keep talks going with a special committee of Dell’s board, one of these people said. The special committee is expected to review the proposals and determine whether either or both are likely to lead to an acceptable bid.

The company’s directors have spent the last 45 days trying to find alternatives to a $24.4 billion offer from Michael S. Dell and theprivate equity firm Silver Lake.

In its letter, Blackstone proposed offering more than $14.25 a share for Dell, working with the investment firms Francisco Partners and Insight Venture Partners, one of these people said. The preliminary plan envisioned offering existing shareholders the opportunity to remain investors in the computer company through what is known as a public stub, though those who wish to sell off their entire holdings can do so.

Blackstone didn’t disclose the potential size of the public stub.

Mr. Icahn outlined a plan to pay $15 a share for about 58 percent of the company, this person said. His proposal is likely to allow shareholders to sell only a portion of their stakes.

The Wall Street Journal chose to focus on the derailment of Michael Dell’s plan to regain control of the company he founded. Here are a few excerpts from its story:

Michael Dell‘s plan to gain greater control of his company and take it private began to backfire, as rival bidders for the computer maker floated competing offers that, if accepted, could leave him out of a job.

The thickening takeover plot shows that some of the most influential players in finance see a brighter future for Dell, or at least a way to make money in the bidding war. It comes as shipments of personal computers around the world have entered a tailspin while tablets and smartphones grow in popularity. PCs represent about half of Dell’s revenue.

It was Mr. Dell himself who kicked off the effort last year to take the company private that now has competing bidders circling.

Mr. Dell, 48 years old, founded the company in 1984 out of his University of Texas dorm room, turned it into a personal-computing powerhouse and, after stepping down as CEO in 2004, returned to resume leadership six years ago.

Back at the helm, Mr. Dell’s efforts to revive the PC-maker sputtered amid competition from resurgent rivals such as Apple Inc. and the rising popularity of smartphones and tablet computers—areas where Dell has been weak. Dell’s revenue and PC market share each have shrunk since Mr. Dell returned as CEO.

The Silver Lake buyout would give Mr. Dell majority control in Dell’s equity and a shot at leading efforts to revive the company as a private entity not answerable to shareholders.

But it’s the shareholders who continue to search for a better deal for the computer maker. Here’s more from the WSJ:

Some Dell shareholders have said Mr. Dell’s buyout offer—about a 25% premium to the share price before news of the deal talks broke—doesn’t fairly value Dell’s business, particularly the cash it generates on a regular basis and its potential to grow in areas like information-technology services. Shareholders including Southeastern Asset Management Inc., T. Rowe Price Group Inc. and Mr. Icahn have lambasted the deal as undervaluing the company.

Now, shareholders might have the chance to get more for their money, or to keep shares. Proposals by New York-based Blackstone, the private-equity giant, and Mr. Icahn both aim to give current Dell shareholders who want to retain some stake in Dell’s future a chance to do so. Their potential deals would have bidders buying controlling positions, but not the whole company, leaving some shares to continue to trade publicly in what’s known as a public “stub.”

And it’s the option to retain some exposure to the firm that might leave some investors pushing for one of the alternative proposals. It’s hard to imagine that Iachan, Blackstone, Michael Dell and Silver Lake are all wrong about the potential upside for the company. This may send Dell and his investors back to the drawing board to come up with another proposal in order to keep control.