By Jessica Toonkel and Greg Roumeliotis
(Reuters) - Dell Inc said it received alternative proposals from Blackstone Group LP and Carl Icahn that could be superior to the $24.4 billion takeover offer from founder Michael Dell and private equity fund Silver Lake Partners.
Michael Dell is willing to explore the possibility of working with third parties regarding alternative offers, the company said on Monday.
However, it said the special board committee considering a sale continues to support the company's pending sale to Michael Dell and Silver Lake.
Southeastern Asset Management, the company's largest shareholder after Michael Dell and a staunch opponent of the founder's buyout offer, said it was pleased that the two new bids were structured in such a way that shareholders could remain invested in the company.
The special committee was evaluating the new takeover proposals to decide whether either or both were likely to trump the existing take-private deal, Reuters reported on Sunday, quoting a source familiar with the discussions.
Icahn offered $15 per share for 58 percent of Dell, while Blackstone proposed paying more than $14.25 per share. The Silver Lake group offered $13.65 per share for all of Dell.
Dell's shares rose 2.9 percent to $14.55 in morning trading on Monday.
ICAHN-BLACKSTONE BID?
Icahn Enterprises raised the prospect of working with Blackstone, saying the two groups had held preliminary talks.
"We plan to review the Blackstone proposal in greater detail," Icahn Enterprises said Monday, adding that the Michael Dell-Silver Lake proposal "significantly undervalues Dell."
One issue for the special committee is how to compare the proposals. Both Blackstone's and Icahn's proposals envision that a portion of Dell's stock will remain publicly traded.
Silver Lake was not reachable for comment outside normal business hours in the United States.
"We continue to believe a higher bid than the current $13.65 per share offer will likely be offered but, based on our assumptions, a $15 per share bid may be a threshold," Wells Fargo Securities analyst Maynard Um said in a note.
"We believe a higher Silver Lake/Dell bid might still be a more attractive and strategic option, assuming information regarding the public stub and financial services sale is accurate," he said.
The rival bids for Dell throw the future of the PC maker into question. For a deal of this size, a "go-shop" period - during which the target company actively looks for rival offers - rarely yields competing offers. The new bids could turn the sale of Dell into a three-horse race that could drag out for months.
It also could threaten the future of Michael Dell, who founded the technology giant at the age of 19 with just $1,000. Under the Silver Lake plan, he planned to contribute his roughly 16 percent share of Dell's equity to the deal, along with cash from his investment firm MSD Capital, and remain CEO of the company. Silver Lake is putting up $1.4 billion.
The Silver Lake group has no plans to increase or amend its offer until Dell's special committee comes out with a ruling on the rival proposals, two sources close to the matter said late on Sunday. They said for now the buyout firm and Michael Dell planned to move forward with their current deal.
But the current plan to take the company private has come under attack from several high-profile Dell shareholders such as Southeastern and T. Rowe Price.
The shareholders have said Michael Dell's offer undervalues the company and have pledged to vote against the deal, which requires a majority of shareholders, excluding the founder, to pass.
"We are pleased that the alternative proposals submitted to the Dell Special Committee are structured to give shareholders the opportunity to continue to participate in the company's future prospects, while also providing a higher cash component for shareholders who choose to exit their investment," Southeastern said in a statement.
RIVAL BIDS
Under Icahn's proposal, Dell shareholders will have a choice of electing cash or stock, but there would be a cap on the amount of cash they could get, the source said.
In other words, if all Dell shareholders chose to cash out, they could only sell 58 percent of their stock, retaining the other 42 percent that will remain publicly traded.
Icahn is being advised by investment bank Jefferies Group Inc. He plans to fund his bid with his own money, Dell's cash as well as new debt.
The investor, who has taken a stake in Dell, earlier this month demanded Dell pay out $15.7 billion in special dividends. He is no longer asking for that, the source said. Jefferies declined to comment on Sunday.
Blackstone recently hired Dell's former vice president of corporate strategy, David Johnson.
Under Blackstone's proposal, Dell also would have a certain amount of stock publicly traded. But unlike the Icahn proposal, Blackstone has proposed buying out any shareholder that wants to cash out of Dell.
Blackstone is being advised by Morgan Stanley, which has also given it a highly confident letter of financing, the source said. Morgan Stanley declined to comment on Sunday.
There have also been some conversations about the Blackstone group selling Dell's financial services business, but that is not part of the current proposal, the source said.
NEXT STEPS
Dell was regarded as a model of innovation as recently as the early 2000s, pioneering online ordering of custom-configured PCs and working closely with Asian component suppliers and manufacturers to assure rock-bottom production costs.
But as of 2012's fourth quarter, Dell's share of the global PC market had slipped to just above 10 percent from 12.5 percent a year earlier, according to research house IDC.
Competing successfully against incumbents, including IBM and Hewlett-Packard, will not be easy no matter what the corporate structure.
A source earlier said that Dell had slashed its internal forecast for fiscal 2013 operating profit to about $3 billion - down sharply from the $3.7 billion it had predicted previously. The source added that more details will be revealed in a proxy filing which is expected by the end of this week.
Meanwhile, if the special committee of the board decides that either - or both - of the rival bids for Dell are reasonably likely to lead to superior offers, Icahn and Blackstone will have to present firm bids for Dell. The negotiations are likely to take weeks, the source said.
At that point, the special committee will again need to decide whether the firm bids from Icahn and Blackstone, which include features such as committed financing, were superior to the Silver Lake-Michael Dell agreement.
If they are superior, Silver Lake and Michael Dell will get one shot at revising their original bid. Unlike most other go-shop processes, where the original bidders get several chances to match rival bids, Dell has given its founder and Silver Lake the right to do so only once.
(Additional reporting by Nadia Damouni and Greg Roumeliotis in New York and Sayantani Ghosh in Bangalore; Editing by Theodore d'Afflisio, Stephen Coates, Saumyadeb Chakrabarty and John Wallace)
Source: http://news.yahoo.com/dells-board-evaluates-rival-bids-source-004054117--sector.html
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