Blackstone Group has reportedly sent a preliminary counter-bid to buy out Dell, which would rival the current proposed offer of US$24.4 billion from Silver Lake Partners and Michael Dell made in early February.
Blackstone, an equity firm, submitted its offer to Dell on Friday, the New York Times reported, citing unnamed sources. The offer sets the stage for Dell to hold discussions with Blackstone about a possible buyout, and Dell has until Tuesday to respond to the offer, according to media reports.
Blackstone’s proposed counterbid is in the price range of between $13.65 and $15 per share, according to a report in the Wall Street Journal on Saturday. That either matches or exceeds the $13.65 per share offered by Michael Dell and equity investor Silver Lake to take the company private.
In a letter sent to Dell, Blackstone envisions shedding Dell’s financial services division as part of the buyout deal. Blackstone has already discussed selling that division to GE Financial Services, the Journal reported, citing anonymous sources.
Dell is expected to soon detail counteroffers to the one made by Michael Dell and Silver Lake, which was announced on February 5. Dell on March 22 wrapped up a 45-day “go-shop” period in which other parties could make counteroffers.
Dell cannot comment on the reports, a company spokesman said on Saturday. Any deal needs to approved by shareholders.
The Blackstone counterbid could set the stage for a long buyout process in which offers are examined and debated. Some of Dell’s major shareholders, including Yacktman Asset Management and Southeastern Asset Management, believe the company is worth more than the $24.4 billion Michael Dell and Silver Lake are offering.
Counter-offers had been rumoured to be in the works. On Thursday, the Journal reported that Blackstone had approached Southeastern Asset Management and TPG about a possible counter-bid.
According to the Journal’s article on Saturday, a possible counteroffer was also in the works by investor Carl Icahn, who is opposed to the current proposed offer and earlier this month reached an agreement with Dell to examine the company’s books.
Analysts have said that any long, drawn-out battle is not in the best interest of Dell as it could erode customer confidence.
“It’s in everyone’s — company, employees, partners, customers — best interest to resolve the situation as quickly as possible. The longer this drags on the more likely we will see impact to Dell’s business,” said Matt Eastwood, group vice president of IDC’s Enterprise Platform Group, in an email on Friday.
An open question is whether it’s best for the company to execute on the original deal that Michael Dell outlined last month, or whether there would be a change in strategy if his offer isn’t accepted, Eastwood said.
“I believe there is more long term value to be unlocked by continuing the business transformation that Dell started five years ago,” Eastwood said.
Dell is focusing more on enterprise products as it tries to move away from the low-margin PC market.