Private equity giant Blackstone Group, L.P. (BX) is aggressively wooing Oracle Corp. (ORCL) President Mark Hurd to run Dell, Inc. (DELL) as part of its plans to float a last minute rival bid for the beleaguered personal computer maker as the 45-day go-shop period ends on Friday, according to media reports on Wednesday.
New York-based Blackstone was also trying to rope in Michael Dell to partner it in the rival bid along with other partners as it will need the Dell founder's support and strategic expertise due to the large size of the leveraged buyout. Michael Dell will reportedly be replaced by Hurd, former CEO of Hewlett-Packard (HPQ), in the group if he refuses to join the Blackstone-led consortium.
Round Rock, Texas-based Dell had agreed in early February to be taken private in a $24.4 billion deal by its founder, Chairman and CEO 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.
Earlier in March, the company's special committee of board of directors had unanimously determined that "the sale of the Company would be the best alternative for stockholders" following the evaluation of strategic alternatives conducted over a period of more than five months.
The committee also revealed that its financial adviser, Evercore Partners, is now actively soliciting potential alternative proposals under the a robust 45-day go-shop process that concludes on March 22. Evercore is being paid an incentive for roping in superior proposals.
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.
Other potential bidders include rival PC makers Hewlett-Packard (HPQ) and China's Lenovo Group Ltd. (LNVGY.PK) as well as billionaire investor Carl Icahn's Icahn Enterprises (IEP), as all the four parties, including Blackstone, have reportedly inspected Dell's books after signing non-disclosure agreements.
The companies will have to make a formal 'indication of interest' to float a superior bid for Dell before the March 22 deadline expires, but negotiations can go on for nearly two month. Meanwhile, Blackstone is seen as the only serious contender to counter Silver Lake's bid.
The deal would be Blackstone's largest leveraged buyout in recent times after its $17.6 billion technology firm buyout as part of a consortium to acquire Freescale Semiconductor in 2006. Its last multi-billion buyout was the $2 billion acquisition of privately-held home automation services provider Vivint, Inc. in September 2012.
The proposed going private deal is likely to allow Dell to focus on hardware, software and services for businesses without the scrutiny and limitations of being a public company. If a deal goes through, it would be the biggest leveraged buyout since the financial crisis.
Dell was among the worst sufferers among the technology giants during the recession. In order to drive growth and remain competitive, Dell resorted to acquisitions, cut thousands of jobs and closed plants. Of late, Dell is struggling with lower sales for desktops and laptops as consumers switch over to tablet PCs such as the iPad from Apple Inc. (AAPL).
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 $25.04 billion now.
BX closed Wednesday's regular trading session at $14.33, up $0.02 or 0.14% on a volume of 9.85 million shares.
by RTT Staff Writer
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