Bloomberg News

Blackstone Said to Mull Outbidding Silver Lake for Dell

March 19, 2013

Blackstone (BX:US) Group LP is weighing a bid for Dell Inc. (DELL:US), the computer maker seeking offers to rival the proposed $24.4 billion buyout by its founder and Silver Lake Management LLC, said people with knowledge of the matter.

Blackstone may bid as part of a group with other investors, said one of the people, who asked not to be named because the process is confidential. The New York-based private-equity firm hasn’t made a decision, another person said. Under the go-shop provision of the Silver Lake merger agreement, Dell’s board (DELL:US) has through March 22 to seek superior proposals, and can negotiate beyond that date if it receives an offer it deems serious.

The computer maker’s takeover by founder Michael Dell and Silver Lake would be the largest leveraged buyout of a technology company since the financial crisis. A bid from Blackstone would put pressure on them to raise the $13.65-a-share offer, which has drawn opposition from Dell’s two biggest outside shareholders, as well as activist investor Carl Icahn.

“If Blackstone were to make an offer out there, I don’t think that’s the end game,” said Angelo Zino, an analyst at Standard and Poor’s in New York. “Then Michael Dell has to revisit his $13.65 offer.” That could lead to a bid as high as $15 a share, he said.

Dell’s shares climbed 1 percent to $14.31 at 4 p.m. in New York, or 4.8 percent above the current bid, signaling investors are betting the price tag will ultimately exceed the current offer.

Due Diligence

Blackstone, Hewlett-Packard Co. and Lenovo Group Ltd. have inspected Dell’s books after signing non-disclosure agreements, people familiar with the matter said this month. Billionaire Carl Icahn also is conducting due diligence after amassing his own Dell stake, and is pressing for a special dividend over a buyout.

Michael Dell is attempting to take the PC maker private after a quarter century as a publicly traded company as business has shifted toward cloud computing, where storage and software are delivered at low cost over the Internet.

David Frink, a spokesman for Dell, declined to comment. Peter Rose, a spokesman for Blackstone, wasn’t immediately available to comment.

At least five analysts surveyed by Bloomberg this month said a bid for Dell could reach as high as $15 a share. At $15, Dell still would be going private at about 5.4 times earnings before interest, taxes, depreciation and amortization, the lowest multiple for a technology buyout larger than $1 billion, according to data compiled by Bloomberg.

Blackstone’s Interest

Blackstone’s interest in Dell, the world’s third-largest PC maker, is considered more serious than that of HP or Lenovo, said one of the people familiar with the situation. As of last night, no one had submitted a proposal or letter to the board for consideration, said another person with knowledge of the situation. The board would have to receive something by March 22 and then determine whether the interest would reasonably lead to a higher offer, this person said.

Dave Johnson, Dell’s former head of M&A, joined Blackstone last year as a partner in the technology group. If Blackstone proceeds with an offer for Dell, it would be the buyout firm’s biggest technology deal since Freescale Semiconductor Inc., which it bought with two other private equity firms for $17.6 billion in 2006. Blackstone and its co-investors have registered a more than 50 percent loss on their $7.2 billion outlay, according to data compiled by Bloomberg.

As part of the original deal, Dell agreed “to explore in good faith” working with another bidder that could beat Silver Lake’s offer, according to a Feb. 6 regulatory filing.

The bid from Silver Lake requires approval from a majority of shareholders, excluding Michael Dell, who is contributing his 15.6 percent stake to the new company in addition to investing more cash. Dell’s largest outside investors, Southeastern Asset Management Inc. and T. Rowe Price Group Inc., have argued the offer fails to reflect the company’s fair value.

To contact the reporters on this story: Serena Saitto in New York at ssaitto@bloomberg.net; David Carey in New York at dcarey13@bloomberg.net

To contact the editor responsible for this story: Jeffrey McCracken at jmccracken3@bloomberg.net


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Companies Mentioned

  • BX
    (Blackstone Group LP/The)
    • $30.9 USD
    • 1.49
    • 4.82%
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