Blackstone and Icahn enter Dell bidding

Dell founder and CEO Michael Dell answered questions onstage at the Web 2.0 Summit.

Story highlights

  • Blackstone and Carl Icahn are preparing to submit formal bids for Dell
  • Will rival the proposed $24.4bn buyout by founder and chief executive Michael Dell

Blackstone and Carl Icahn are preparing to submit formal bids for Dell to rival the proposed $24.4bn buyout by founder and chief executive Michael Dell and Silver Lake Partners, according to people familiar with the matter, setting up a bidding war for the flailing personal computer company.

Both Blackstone and Mr Icahn sent letters to Dell on Friday night, saying they are preparing formal bids, these people said. This will give both parties more time to finalise their proposals. Details of the approaches were not available on Saturday, but Dell is expected to make more details of the letters public on Monday.

Blackstone, the world's largest private equity fund, and Mr Icahn, a veteran corporate raider, made their formal approaches Friday night as a "go-shop" period for the company to explore other options to the agreed upon deal expired.

Mr Dell and Silver Lake have agreed to buy the company for $13.65 per share. Bids from Blackstone and Mr Icahn were expected to be higher than that price, but less than $15 a share, one person said. Shares closed Friday at $14.14.

If Dell's special committee agrees to accept a superior proposal, Mr Dell and Silver Lake will have just one opportunity to match that bid.

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Because the bids came in by Friday night, the break fee if Dell decides to be sold to another buyer will remain at $180m. Any new buyer to come to the table would now have to pay Mr Dell and Silver Lake $450m.

Blackstone and Mr Icahn had previously signed non-disclosure agreements with Dell, giving them access to the company's books. Dell reported poor earnings last quarter, suggesting that the troubles facing the company were only getting worse. Mr Icahn has said he has a substantial stake in the company, though the exact amount is not publicly known.

The original offer from Mr Dell and Silver Lake represented a 25 per cent premium to the company's undisturbed share price, but still left many shareholders dissatisfied, including Southeastern Asset Management, owner of 8.4 per cent of shares.

Southeastern had been in discussions about rolling its stake into the Blackstone bid, and those deliberations continued into the weekend, one person said.

Should Blackstone or Mr Icahn win control of Dell, it is not clear what either would do with it. Blackstone has considered splitting the company up, selling its financing business or even spinning off its PC business. Mr Dell and Silver Lake had not disclosed their plans for a turnround, either.

Mr Dell's role in a rival offer also remains unclear, though people familiar with the situation say he is open to working with other buyers.

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