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Dell Confirm Rival Offers From Blackstone, Carl Icahn


Dell, Inc. (DELL) confirmed Monday the receipt of two rival bids for the beleaguered personal computer maker that could see its founder, Chairman and CEO Michael Dell lose control of the company. A consortium led by private-equity giant Blackstone Group, L.P. (BX) as well as a group led by billionaire investor Carl Icahn's Icahn Enterprises (IEP) have floated separate "indication of interest" before the 45-day go-shop period concluded on Friday.

Blackstone-led consortium, including Francisco Partners LP and Insight Venture Partners LP, have indicated a cash and stock offer in excess of $14.25 per share for a part of Dell in a leveraged recapitalization transaction. Meanwhile, Icahn has offered to acquire 58.1 percent of Dell at $15 per share in cash.

Both the alternative proposals have a common factor, providing shareholders who wish to participate in the ongoing upside of the company the opportunity to remain invested, with the Dell continuing to be publicly traded on the Nasdaq.

Both the groups have offered to put in their final bids as soon as possible following the completion of satisfactory due diligence and then to go ahead to negotiate a mutually agreeable merger agreement.

A special committee, consisting of four independent and disinterested directors, have deemed that both indicative offers could reasonably be expected to result in superior proposals, but a final decision is expected to be made later in the day. The company noted that there can be no assurance that either proposal will ultimately lead to a superior proposal.

Alex Mandl, Chairman of the Special Committee, said, "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. We intend to work diligently with all three potential acquirers to ensure the best possible outcome for Dell shareholders, whichever transaction that may be."

If the committee accepts either of the new offers, it is required to provide at least four business days notice to Michael Dell and Silver Lake to top it with a superior offer. However, according to the agreed deal, they can only make one bid to top either of the two rival bids, and will not be able to make a second sweetened offer.

Meanwhile, the special committee noted that Michael Dell has confirmed his willingness to explore in good faith the possibility of working with third parties regarding alternative acquisition proposals.

The strength of Michael Dell offer is his participation and his decision to roll over his 15.6 percent stake to help finance the deal. However, Blackstone has been reportedly wooing Oracle Corp. (ORCL) President Mark Hurd or former Compaq CEO Michael Capellas to run the company if their plans to rope in Michael Dell fails.

Round Rock, Texas-based Dell had agreed in early February to be taken private in a $24.4 billion deal by Michael Dell in partnership with private equity firm Silver Lake Partners. The deal is expected to close before the end of the second quarter of Dell's fiscal year 2014.

However, Michael Dell and the company's special committee are already facing backlash from its two largest outside shareholders, Southeastern Asset Management and T. Rowe Price (TROW), on the leveraged buyout. Both of them have made public their decision to vote against the deal.

The company engaged its financial adviser, Evercore Partners, to actively solicit alternative proposals under a robust 45-day go-shop process, and incentivized Evercore for roping in superior proposals.

Earlier in March, the company's special committee of board of directors had unanimously determined that the sale of the company, at a premium, would be the best alternative for stockholders. This decision came after the evaluation of strategic alternatives conducted over a period of more than five months.

Dell has fallen out of favor in recent years, struggling with lower sales for desktops and laptops as consumers switch over to tablet PCs such as the iPad from Apple Inc. (AAPL). In order to drive growth and remain competitive, Dell resorted to acquisitions, cut thousands of jobs and closed plants.

Dell, founded in 1984 by Michael Dell in his University of Texas dorm room, was once a darling of Wall Street and the world's largest PC maker that boasted a market capitalization above $100 billion. Dell's market capitalization has fallen to $24.71 billion now.

In Monday's regular trading session, DELL is currently trading at $14.59, up $0.45 or 3.18% on a volume of 9.63 million shares, and BX is trading at $19.74, up $0.03 or 0.15% on a volume of 0.11 million shares.

by RTTNews Staff Writer

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