(Adds analyst commentary, Dell statement, other information, in
the third, fifth through seventh, ninth, 12th and 14th through 17th
paragraphs.)
--Icahn offers $15 a share for Dell; Blackstone offers $14.25 a
share.
--Icahn's offer includes total $5 billion equity commitment
--Shareholders could choose between stock in new company or
cash
By Tess Stynes
Dell Inc. (DELL) has received two alternative takeover
proposals--one from activist investor Carl Icahn and the other from
a private-equity fund managed by Blackstone Group LP (BX)--that a
special board committee said may result in superior proposals to
the one offered last month by founder Michael Dell.
Mr. Dell, whose offer of $13.65 a share values the struggling
computer maker at $24.4 billion, has said he is willing to explore
in good faith the possibility of working with third parties on the
alternate takeover proposals. His offer was made in conjunction
with investment firm Silver Lake Partners.
The offer from Mr. Icahn, who also disclosed about a 4.6% stake
in Dell, includes a total $5 billion equity commitment. He is
offering to buy $2 billion of the surviving firm's shares for $15
apiece as well as offer an additional $2 billion of cash equity
financing, in addition to shares he and his firm already own.
Shareholders would have a choice of receiving shares in the new
Dell on a one-to-one basis or $15 a share in cash. The potential
payout to shareholders could be as much as a combined $15.65
billion, with shares being accepted on a pro-rated basis, if the
shares tendered exceed that amount.
A separate group led by Blackstone Management Associates.
meanwhile. is offering to acquire Dell for $14.25 a share in cash
or stock and said existing shareholders would have the opportunity
to remain on board. It said it would fund the deal with a
combination of equity and debt financing. The offer expires at 5
p.m. EDT Thursday.
"With three forces at work, we believe a higher buyout bid is in
the cards and we continue to believe that an $18 buyout price for
Dell makes sense," Topeka Capital Markets analyst Brian White wrote
in a note to clients. "However, it is unlikely that this price
level will occur in the first round of bidding."
Dell shares rose 3.5% to $14.63 early Monday.
The thickening takeover plot shows that some of the most
influential players in finance see a brighter future for Dell, or
at least a way to make money in the bidding war. It came as
shipments of personal computers around the world have entered a
tailspin while tablet computers and smartphones grow in popularity.
PCs represent about half of Dell's revenue.
It was Mr. Dell himself who kicked off the effort last year to
take the company private that now has competing bidders circling.
Mr. Dell, whose bid included a "go shop" provision allowing the
company to solicit higher offers, has said he is willing to explore
in good faith the possibility of working with third parties on the
alternate takeover proposals.
The founder's bid faced opposition from the start from several
large shareholders who argued it undervalued the company.
Blackstone and Mr. Icahn expressed interest in the computer
maker before a key deadline for offers expired Friday, with each
notifying the special committee that they were working on firm
bids.
The bids from Blackstone and Mr. Icahn each include some shares
remaining public. Leaving this so-called stub allows the bidders to
offer more for each share they are purchasing without having to pay
more for the whole company. It also provides an opportunity for
those interested to prosper from any Dell turnaround. On the
downside, though, a stub may make it harder for new management to
execute a turnaround if they have to answer to shareholders.
The Dell special committee, which is made up of four independent
directors, said it hasn't determined whether either the Blackstone
proposal or the Icahn proposal in fact constitutes a superior
proposal to the existing merger agreement, and neither is
sufficiently detailed or definitive for such a determination to be
appropriate.
ISI Group analyst Brian Marshall said the latest bids looked
credible, though he doubted offers for Dell could rise much higher
than $15 in light of the challenges threatening its business.
"Everybody's realized that the Dell's fundamentals are
challenged," Mr. Marshall said. "If they can get liquidity at a
higher price, then Dell will take that deal."
If all eligible shares are tendered to Mr. Icahn's offer, he and
his associates would have a stake of roughly 24.1% in the new
company.
Major holders such as Icahn Enterprises (IEP), Southeastern
Asset Management Inc. and T. Rowe Price Group Inc. (TROW) would see
shares rolled over into the new company under Mr. Icahn's
proposal.
Mr. Icahn and his associates said they would be willing to
provide an additional $2 billion equity investment in the event
that major shareholders don't agree to rollover their existing
shares into the new company.
--Drew FitzGerald contributed to this article.
Write to Tess Stynes at Tess.Stynes@dowjones.com.
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