(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
By Robert Cyran
NEW YORK, March 21 (Reuters Breakingviews) - A counter-offer
for Dell DELL.O is a nicer idea in theory than in practice.
Though backers of the $24 billion buyout are, oddly, talking
down the U.S. computer maker's prospects, investors rightly
think the price is low – and Blackstone (BX.N) is kicking the
tires. But other factors weigh against a higher bid.
New interest would need to emerge before Friday, when the
"go shop" provision built into last month's agreed deal with
Silver Lake Partners and the company's founder expires. In the
meantime, parts of a Dell filing with regulators have been
leaked. Among them are projections of a sharp decline in
Even so, Dell shares are trading at around $14.20 each,
while the Silver Lake-Michael Dell offer stands at $13.65 a
share. The implication is that investors think the price will go
higher. Southeastern Asset Management, with a stake above 8
percent in the company, is one of several owners concerned that
the recommended offer is an insider stitch-up. As Southeastern
has noted, Dell's net cash, its finance business at book value
and the cost of recent acquisitions add up to most of the
purchase price. The buyers, by that logic, get the PC business
almost for free.
That ought to mean the numbers for a rival bid could be made
to work. Yet rival hardware producer Hewlett-Packard (HPQ.N) is
beset with other problems and for Lenovo (0992.HK), another
competitor, Dell would most likely be too big a mouthful.
Financial buyers offer a better prospect. Blackstone has
even gone so far as to approach Oracle ORCL.O executive and
former HP boss Mark Hurd about running Dell, according to a
Reuters source. But an alternative bid would probably require
several investors, and club deals are out of favor. Moreover
Blackstone could be held back by the bad memory of its
participation in the ill-timed 2006 buyout of Freescale
Semiconductor FSL.N for $17.6 billion. It's also years since
buyout firms were gung-ho enough to fight over a target remotely
as large as Dell.
So it's not just about the math. Michael Dell, who holds
about a 15 percent stake in the company, is also a key figure.
He has said he will work with other bidders. But he hasn't said
he would throw his whole stake behind an effort to trump his
existing offer. The big picture suggests he probably won't need
to consider it.
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- Blackstone is weighing a counter-offer for Dell, according
to news reports. The private equity firm has approached Oracle
executive and former Hewlett-Packard boss Mark Hurd as a
possible chief executive of the company, according to Reuters,
citing a person familiar with the situation.
- The board of Dell on Feb. 5 agreed to a $24.4 billion, or
$13.65 a share, buyout led by Chief Executive Michael Dell and
Silver Lake Partners. A "go shop" period allowing a search for
alternative buyers ends on March 22.
- Reuters: Blackstone asks Oracle's Hurd if he wants to run
Stacked deck [ID:nL1N0BB2B5]
Groucho deal [ID:nL1N0B54SX]
- For previous columns by the author, Reuters customers
can click on [CYRAN/]
(Editing by Richard Beales and Martin Langfield)
Keywords: BREAKINGVIEWS DELL/
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