Blackstone, Lenovo, HP and Now Icahn – The Dell Saga Continues
The drama continues for Dell, with two major developments this week – both of which are good for shareholders, but not so good for Dell.
Development 1: Blackstone, HP and Lenovo have variously been reported in the media as being interested in Dell. As of now, they appear to be obtaining and reviewing internal financial data on Dell to determine if they should make a competing bid before Dell’s “go shop” period ends on March 22.
$13.65 per share is the price to beat and if any of those 3 entities bids more than $24.4B, that’s good for shareholders. Naturally, Dell has been trading higher ($14.26 as of today) since this news got out.
But what’s good for Dell shareholders may not be good for Michael Dell. Who knows if he will still run Dell (the existing offer/deal will retain him at the top) if Blackstone, HP or Lenovo make a winning bid?
He and SilverLake may then bid even higher and once again, existing shareholders will benefit. It will be interesting to see what’s the most that anyone thinks Dell is worth.
Development 2: Carl Icahn, the famed and feared “activist” shareholder just announced that he amassed a 6% slice of Dell stock as the first step.
His next step was to send a nicely worded letter (bottom half of the SEC page) to Dell’s board telling them that Dell was actually worth $22.81 a share in the near future and that existing shareholders should realize this value (in the form of a $9 special dividend per share and a post-dividend payout share price of $13.81).
a special dividend of $9 per share comprised of proceeds from the following sources: (1) $4.26 per share, or $7.4 Billion, from available cash as proposed in the Going Private Transaction, (2) $1.73 per share, or $3 Billion, from factoring existing commercial and consumer receivables as proposed in the Going Private Transaction, and (3) $4.26, or $5.25 Billion in new debt.
But in order for shareholders to get to that higher point, they must first vote down the current deal.
And what better way to get more shareholders to join him and Southeastern et al in opposing the current deal than to tell them that they can do better – much better, if they can all join forces:
Our proposal provides Dell shareholders with substantial cash of $9 per share and the ability to continue as owners of Dell, a stock that we expect to be worth approximately $13.81 per share following the dividend. We believe, as apparently docs Michael Dell and his partner Silver Lake, that the future of Dell is bright. We see no reason that the future value of Dell should not accrue to ALL the existing Dell shareholders – not just Michael Dell.
It remains to be seen how many other shareholders will bite and if he can get enough of them on board.
If he does, Michael Dell better watch out because there is no guarantee that the newly recapitalized Dell, with Icahn and his new allies controlling a substantial amount of outstanding stock, will allow him to run the company.
For now, we will sit back and wait for the next episode in Dell’s unfolding soap opera.
According to David Davidoff (whose excellent book on the PE world, “Gods at War” I am now reading), there is more to this move from Carl Icahn than meets the eye or is discussed above.
Read for yourself at
http://dealbook.nytimes.com/2013/03/07/for-icahn-a-game-of-chicken-with-dells-board/?nl=business&emc=edit_dlbkpm_20130307
And in other news, Dan Primack at Fortune thinks that Icahn’s plan may (obviously?) not be the best one for Dell:
http://finance.fortune.cnn.com/2013/03/08/why-dell-doesnt-like-icahns-plan/