By MICHAEL LIEDTKE
2013-03-30 07:56 AM
The wide-ranging efforts to ignite a bidding contest for Dell Inc. are among the morsels of new information contained in a voluminous recitation of the events that have thrust the world's third largest PC maker on to the auction block.
The bidding has boiled down to a group led by company CEO Michael Dell and Silver Lake Partners vying against separate alternative proposals submitted during the past week by buyout specialist Blackstone Group LP and billionaire investor Carl Icahn. The other potential suitors contacted by Dell's financial advisers weren't identified in Friday's disclosures.
For now Dell's board is standing behind its nearly two-month old agreement to sell the Round Rock, Texas, company to Michael Dell and Silver Lake for $24.4 billion, or $13.65 per share. But the board is still holding out the possibility that it might side with one of the offers from Blackstone or Icahn once they finalize their bids in the next few weeks. Blackstone has pledged to offer more than $14.65 per share for most of Dell Inc.'s outstanding stock while Icahn says he plans to pay $15 per share for up to 58 percent of the company's outstanding stock.
Dell hopes to complete a sale by Aug. 2, although it still hasn't even set a date for a shareholder meeting to approve whichever deal gets the board's final blessing.
Friday's regulatory filing provided Dell's board with its best chance yet to convince shareholders that it has gone to great lengths to ensure the company is sold for the highest possible price, given the challenges facing PC makers at a time sales of desktop and laptop machines have been declining as more people embrace smartphones and tablets.
Dell's disclosures underscored the bleak outlook in Friday's filing by including snapshots of internal financial projections that were lowered during the past eight months as the company's management and board came to grips with the depths of the PC downturn.
In July Dell's management presented a forecast calling for an operating profit of $5.6 billion on revenue of $66 billion in the current fiscal year ending in January 2014. After mulling a variety of information, Dell's board concluded the company is more likely to post an operating profit of $3 billion, a 46 percent decrease from the July prediction. The board is now planning for revenue of $56.5 billion for the current fiscal year, a 14 percent drop from the earlier forecast.
Michael Dell, the company's CEO and founder, believes he will be in a better position to engineer a turnaround if he doesn't have to cater to Wall Street's fixation on whether revenue and earnings are growing from one quarter to the next. That's why Dell would end its 25-year history as a publicly held company if its CEO's debt-laden proposal wins out. The deal would saddle Dell Inc. with more than $15 billion in debt, including a $2 billion loan from Microsoft Corp.
Blackstone and Michael Dell also have left open the possibility of working together, if Blackstone should end up in control of the company. Icahn hasn't indicated whether he would want to retain Michael Dell if his bid succeeds.
Michael Dell's deal is facing resistance from major shareholders who believe the sales price isn't high enough. Southeastern Asset Management, the company's second biggest shareholder after Michael Dell, contends Dell Inc. is worth nearly $24 per share. The Memphis, Tennessee, firm had suggested that it work with Michael Dell on a buyout last June, according to Friday's filing.
A month after Southeastern floated the buyout idea, Michael Dell met with a Silver Lake representative at an industry conference and set up an August meeting to discuss how they might work together.
Silver Lake initially was competing against another unidentified buyout firm that dropped up of the bidding in early December. Silver Lake at first proposed paying $11.22 to $12.16 per share before finally settling on $13.65 per share after being prodded by Dell's board to raise its offer on several occasions, according to the company's filing.
After the deal with Michael Dell and Silver Lake was announced in early February, company adviser Evercore Partners contacted 67 different potential suitors and fielded unsolicited inquiries from four other parties, according to the filing. Only 11 of the potential bidders that spoke with Evercore were interested in exploring a deal. The documents didn't identify any of the other suitors besides Blackstone and Icahn.
To keep Blackstone at the negotiating table, Dell agreed to pay up to $25 million of the firm's expenses.