* Dell says Michael Dell willing to work with third parties
* Special panel still supports Michael Dell-Silver Lake deal
* Icahn firm in talks with Blackstone
* Top shareholder Southeastern happy with new offers
* Dell shares up 3 pct
By Jessica Toonkel and Greg Roumeliotis
March 25 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
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
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
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
"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.
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.
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.