Dell: As Blackstone, Icahn circle, is there 'significant upside' left?

The competition is heating up over which investors will acquire the U.S. technology company. Is it worth the attention? A look at the proposals.


Last month, Dell agreed to a $24.4 billion deal to be acquired by founder Michael Dell and Silver Lake Partners.

But the American technology company has since received two alternative takeover proposals, according to a Wall Street Journal report -- one from activist investor Carl Icahn, and the other from a private equity fund managed by Blackstone Group.

Those preliminary proposals were made public today.

Highlights from the Blackstone letter:

"We believe there is significant upside in the Dell businesses, we see significant upside in the value of Dell’s shares, and our proposed transaction structure (described below) will deliver significantly greater value to your shareholders than the value agreed to in the Merger Agreement."

"We are prepared to enter into a definitive agreement to acquire Dell in a leveraged recapitalization transaction where shareholders could choose to receive either all cash or stock (subject to a cap), in each case valued in excess of $14.25 per share, representing a Superior Proposal to the $13.65 cash purchase price agreed to in the Merger Agreement."

The upsides: a higher price per share for shareholders electing to receive cash; a "shareholder-friendly structure" with the ability to choose cash or stock; "leveraged upside" for shareholders who elect to remain as shareholders. The proposal expires on Thursday at 5:00 p.m. New York time.

You can read the full letter here.

Highlights from the Icahn letter:

"We believe that you will agree that Icahn Enterprises is well able to provide the $1 billion cash equity capital (in addition to its existing $1 billion stock position in Dell), and that Mr. Icahn and his affiliates other than Icahn Enterprises are well able to provide the additional $3 billion cash equity capital, contemplated in this Acquisition Proposal, which constitutes an aggregate $5 billion equity commitment."

"Although we are well known for the performance of our investment activities, over time we have found that our greatest returns have come from the control and ownership of portfolio companies."

The proposal: a $5 billion equity commitment in which Icahn purchases $2 billion of the surviving company's shares for $15 each, as well as offers another $2 billion in cash equity financing. That doesn't include the 4.6 percent stake he already has in Dell.

You can read the full letter here.

In sum: both Blackstone and Icahn's proposals value the company higher than the Dell-Silver Lake bid, but each's terms vary in how much financial flexibility they allow the company.

The persistent question through all of this activity: is the company worth it?

Is there really "significant upside" to Dell's businesses? (Does Mark Hurd know something we don't? ) Or are these rival bids just a ploy to profit from the company's instability ?

Outgoing Reuters editor Peter Lauria hit it on the head this morning:


(The link in his tweet, if you're interested: a solid Reuters overview of the proposals.)

Michael Dell is reportedly preparing to sweeten his original proposal in response to the bids; he gets one shot to do so during this period. But you've really got to wonder if there's any room left for the company to turn around its fortunes.

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