Dell (Nasdaq: DELL) confirmed early Monday that it has eceived bids from Blackstone Group LP and Carl Icahn that may be considered superior to founder Michael Dell’s buyout offer for the personal-computer maker.
The special committee running the go-shop process has determined that both proposals could reasonably be expected to result in superior proposals, Dell said in a statement today. Michael Dell is willing to work with third parties, the company said.
The unexpected challenges to the original bid, which came as the computer maker struggled to catch up with a new wave of nimbler competitors in mobile computing and business services, mean Dell and Silver Lake may have to respond with a better proposal. Michael Dell, who founded the PC provider in his Texas dorm room in 1984, needs to ensure majority control so he can pursue his plan to retool the struggling company as a maker of data-center gear and software for corporations — without the scrutiny of public investors.
At least five analysts surveyed by Bloomberg earlier this month saw the buyout group increasing the bid to as much as $14.90 to $15 a share.
‘Next Stage’
“Michael wants to play a role here,” said Jayson Noland, an analyst at Robert W. Baird in San Francisco, who has a neutral rating on the shares. “This is his company — it’s been his life, his name’s on the door and he’d like to be part of the next stage,” he said. “The most likely scenario is Silver Lake and Michael Dell take this company private for something north of what they’re currently offering.”
At $15, Dell still would be going private at about 5.4 times earnings before interest, taxes, depreciation and amortization, the lowest multiple for a technology buyout larger than $1 billion, according to data compiled by Bloomberg.
For the 48-year-old chief executive officer, once part of a technology-industry pantheon that includes Microsoft Corp. co- founder Bill Gates and Oracle Corp. CEO Larry Ellison, prevailing in a surprise takeover fight could help in the effort to restore Dell’s reputation and performance. Once the world’s largest maker of PCs, Dell has floundered as those machines have been eclipsed by tablets and smartphones from companies such as Apple Inc. and Samsung Electronics Co.
The Wall Street Journal reported the competing bids on its web site Saturday.
The Journal, citing unnamed sources, reported that the notification will allow Blackstone and Icahn four more days to develop their offers.
The proposals present unexpectedly serious challenges to Michael Dell’s effort to take private the Round Rock, Texas- based computer maker he created in 1984 as it struggles with competition from smartphones and tablets. Unlike the founder’s offer, both rival plans give shareholders a way to participate in any potential upside, addressing criticism from investors who deemed the buyout offer of $13.65 a share as too low.
It’s also rare for one private-equity firm to seek to break up another’s deal. The strengths of Michael Dell’s offer include his participation and his decision to roll over his 15.6 percent stake to help finance the purchase.
The stock, which closed on March 22 at $14.14, has climbed since the leveraged buyout was announced amid speculation that Dell would fetch a higher price.
Hewlett-Packard Co. and Lenovo Group Ltd. also reviewed Dell’s books during the go-shop period, 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.
