Dell's financial advisers tried to persuade 71 potential bidders to make
an offer for the troubled personal computer maker before two of them
emerged to challenge a proposed $24.4 billion deal with the company's
founder, according to documents filed Friday.
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.
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 Carl Icahn. The other potential suitors
contacted by Dell's financial advisers weren't identified in Friday's
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
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.
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.
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.
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, Tenn., 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
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. (Also see: Dell takeover battle: All you need to know)