Dell Committee Gets Buyout Bids from Blackstone, Icahn
With the competing bids, the pressure will be on Michael Dell and Silver Lake to up their per-share price. For Michael Dell, winning or losing could determine whether he remains with the company. According to a recent report in Fortune.com, Blackstone officials prefer to have Michael Dell as part of their plans, but already have begun making contingencies, including courting Mark Hurd, former CEO of Hewlett-Packard and current president with Oracle. Also named as a possibility was former Compaq and MCI CEO Michael Cappellas, who currently is board chairman for VCE, a joint venture of EMC, VMware and Cisco Systems that focuses on cloud computing infrastructure. As founder of the company, Michael Dell is in the position of having to be more transparent than competing bidders, according to Alex Khutorsky, managing director of The Valence Group, an M&A advisory investment bank. "Dell will have [to] disclose both his plan for the company as well as his projections for valuing his bid, and that number will set both the floor and the ceiling," Khutorsky said in a statement. "Any competitor coming in with a bid between his own private bid and his public valuation for the company will force him to either give up the company or raise his offer and diminish the return." However, Michael Dell may be open to other bids outside of his own. Dell’s special committee in its statement said that Michael Dell has told it of his “willingness to explore in good faith the possibility of working with third parties regarding alternative acquisition proposals.” The New York Times, quoting an unnamed source, reported March 25 that Michael Dell believes the Blackstone proposal is “potentially friendly to management” and may reach out to Blackstone officials this week. Opting for the Blackstone bid would mean backing out of the one with Silver Lake, according to the report.“Having witnessed Hewlett-Packard facing exactly the same issue, Dell could have known how this would go,” he wrote. “Infotech 101, the course that all CEOs of tech companies should have taken freshman year, says that if you start fiddling with your corporate structure in public, you’ll spook your customers and lose business. It might not have been so. If Michael Dell had managed a clean leveraged buyout, maybe the rumbling in the customer ranks wouldn’t have started, but now that it’s open season on Dell (the company), competitors are lining up to harvest Dell’s customers in their season of discontent.”
The real problem for a struggling company in a situation like this has less to do with the money involved in the bids and more with the uncertainty that this environment creates, Roger Kay, principal analyst with Endpoint Technologies Associates, said in a blog post March 25 on Forbes.com. The uncertainty makes customers nervous and gives an opening to rivals like HP, Kay wrote.