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IDG News Service - With Michael Dell still battling to get his US$24.4 billion buyout deal approved by shareholders, his company needs to avoid a long, drawn-out battle that could erode customer confidence.
Dell will soon provide details about any counteroffers to the proposed purchase by Michael Dell and equity investor Silver Lake, who have offered $13.65 per share to take the company private. The deal was announced Feb. 5, and Dell is in the final day of its "go-shop" period in which other parties can make counteroffers.
There have been signs the proposed deal could fall apart, with some big Dell shareholders, including Yacktman Asset Management and Southeastern Asset Management, opposing the buyout on the grounds that it undervalues Dell.
Some counteroffers seem to be in the works, with equity firm Blackstone Group having approached Southeastern Asset Management and TPG about possible alternative bids, The Wall Street Journal reported on Thursday. Blackstone is said to have also approached Mark Hurd, the former Hewlett-Packard CEO who now works for Oracle, about running the company, according to a report by Bloomberg.
The current offer by Silver Lake and Michael Dell included a $2 billion loan from Microsoft, and debt financing commitments from Bank of America, Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets.
After the go-shop period ends, Dell will file documents with the U.S. Securities and Exchange Commission giving its shareholders a chance to examine any alternative offers and their risk factors, said James Post, professor in management, markets, public policy and law at Boston University.
The documents will give shareholders a chance to ensure there is no deception and that there are no better offers on the table than the proposed $24.4 billion deal. Shareholders are usually looking for the highest price for their shares.
It's clear that some shareholders won't back the current deal because they think there's not enough money on the table. "They could go back and forth through several rounds," Post said. "It could be settled in as little as 30 to 60 days. It could be much longer than that."
The deal could get tied up as Dell and dissident shareholders make their cases to shareholders about specific offers, and each maneuver could take months, Post said. There may even be legal proceedings, which would take up even more time, Post said.
Some shareholders will lose money on the current deal, and Dell may end up spending more to win them over, something it clearly wants to avoid, Post said.
"If this deal is going to be accomplished, it will be because the big investors have put the document under the microscope and they're convinced their ownership is being ... rewarded. Otherwise they are going to turn it down," he said.
It's uncertain if there will be a concrete new offer before Friday's deadline, but analysts expect that Michael Dell will have to raise his current offer.
"I expect that the final price per share to acquire Dell will be higher than what was initially offered," Charles King, principal analyst at Pund-IT, said via email. "I also believe that if Michael Dell is not involved in the final deal, that the winning bidders could be paying a premium for the company that will be difficult to manage or sustain," he said.