Blackstone and activist investor Carl Icahn put in bids for Dell on March 22, the last day of the “go-shop” period to solicit competing offers for Dell after Michael Dell and Silver Lake made a $24.4 billion buyout offer for the PC maker that some investors complained undervalued the company.
The Reuters report said it’s still unclear why Blackstone decided to drop its offer, though sources cited in the New York Times said Blackstone decided to walk away from the deal after “discovering that Dell’s business was deteriorating faster than previously understood.”
Dell’s fourth-quarter operating margin shrank to 4.88 percent from 5.81 percent a year earlier, while its cash flow from operations was reduced to $1.44 billion from $1.84 billion. Sales fell 11 percent to $14.3 billion. The company has been hurt as demand for PCs waver due to competition from mobile devices. According to IDC, global PC sales fell 14 percent in the first quarter.
Icahn and Blackstone initially discussed working together on a rival bid. Blackstone offered to pay more than $14.25 per share for Dell. Icahn, who is being advised by investment bank Jefferies Group, offered $15 per share for 58 percent of Dell’s stock, and has yet to drop the proposal, which means there may still be a bidding war for the PC maker.
Michael Dell and Silver Lake’s offer was to take Dell private for $13.65 per share, with Silver Lake putting up $1.4 billion. That deal would allow Michael Dell to remain CEO of the company, and he’d also contribute his 16 percent stake in Dell’s equity to the deal along with cash from his investment firm MSD Capital.
Michael Dell has stated that he wants to shift Dell’s strategy to focus on tablets, data-center hardware, and software for corporations from manufacturing PCs. He returned as CEO of Dell in 2007 after originally resigning that position in 2004.