Michael Dell has been on a mission to take the company he founded nearly 30 years ago private but, if a rival buyout bid succeeds, he could end up losing control of the company.
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According to the Wall Street Journal, Blackstone Group LP and activist investor Carl Icahn showed interest in the computer maker before a deadline for offers expired on Friday. Each apparently notified a special committee of Dell’s board that they are working on solid bids for the company.
According to people familiar with the matter, the step gives Blackstone and Icahn four more days to put together proper offers, with each set to top US$15 a share. That could potentially be more appealing than the US$24.4-billion buyout (at US$13.65 a share) announced by Dell, private equity company Silver Lake Partners, and Microsoft back in February. A number of shareholders also think that this bid undervalues the company.
If successful though, the bid would see Dell once again become the majority shareholder of the world’s third-largest PC manufacturer. This, say some, would allow it to transition away from the shrinking PC market into a one-stop shop for corporate tech needs away from the prying eyes of the stock market.
Were a competing bid to succeed however, Dell would find himself firmly on the sidelines. While a higher competing bid would see him enriched thanks to his stake in the company, it’s unlikely he would see such a scenario as an ideal outcome.
Dell’s 16% stake in the company as well as US$750-million of his cash and equity from his investment fund, MSD Capital LP, has been added to the war chest in his campaign to regain majority control of the company, which also includes US$15-billion in debt financing from Barclays, Bank of America Merrill Lynch, Credit Suisse and RBC Capital.
Blackstone is reportedly working on a deal that wouldn’t require Dell to contribute his shares and is looking at other potential CEOs including Michael Capellas, a former CEO of PC maker Compaq, now part of Hewlett-Packard.
Dell’s strong shareholder position doesn’t actually grant him much sway in which bid the company accepts either. When he approached it with the Silverlake deal, Dell’s board apparently got the company founder to agree to a provision that negates his ability to defeat a buyout deal he doesn’t support.
Under the agreement, Dell is required to vote in the same proportion as other stockholders if Dell shareholders vote on an agreement other than Silver Lake’s.