Will Michael Dell play hardball with rival bids?

He wants to buy the company he founded decades ago. But 2 other offers have come in higher, and a high-stakes decision draws near.

By Jonathan Berr Mar 25, 2013 3:35PM
Top of a Dell laptop (Bobby Yip/Newscom/Reuters)Michael Dell has tried to stay out of the headlines as the soap opera for the company he founded more than two decades ago in his University of Texas dorm room played out. 

But that's about to change as the Round Rock, Texas, company reviews offers that are superior to the $24.4 billion joint bid made last month by Dell and Silver Lake Partners.

Billionaire Carl Icahn, who owns 4.6% of Dell (DELL), has offered to buy as much as 58.1% of Dell's stock for $15 a share.  Blackstone's offer values Dell at more than $14.25 a share. Dell and Silver Lake's bid is for $13.65 per share. Shares of Dell traded Monday afternoon at $14.54, a sign that many investors are expecting a higher bid as well.

The 48-year-old Texan was to wise to wait for rival bids to come in or risk "bidding against himself," says Alex Khutorsky, managing director of The Valence Group, a boutique investment banking firm, in an interview with MSN. He also added that Dell's board had a fiduciary duty to see if there was a superior offer for the company, given Michael Dell's status as a corporate insider.

How much more Michael Dell, who has a reported net worth of about $15.3 billion, will have to pony up to keep his company out of the hands of Icahn and Blackstone is tough to say.  Topeka Capital Markets analyst Brian White is quoted by The Wall Street Journal as saying an $18 buyout offer "makes sense." Analysts surveyed by Bloomberg News are expecting bids of $14.90 to $15 a share.

The one wild card in this process is something that can't be quantified on a spreadsheet: Michael Dell's ego. As the Journal notes, "Dell is willing to explore in good faith the possibility of working with third parties on the alternate takeover proposals." That, however, may be easier said than done.

“This is his company -- it’s been his life, his name’s on the door and he’d like to be part of the next stage," Robert W. Baird analyst Jason Noland told Bloomberg News.

That future is uncertain even under the most optimistic of scenarios. The company's core PC business continues to erode and, while its strategy of focusing on enterprise customers is showing some promise, Dell continues to lag behind bigger players such as IBM (IBM).

--Jonathan Berr does not own shares of the listed companies. Follow him on Twitter @jdberr.


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