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Dell board seeks alternative to founder’s $24bn offer

Warwick Ashford

The board of manufacturer Dell is looking for rival bids for the company amid shareholder anger over founder Michael Dell's $24bn offer.

Michael Dell made the offer in February, with a $2bn loan from Microsoft, to buy back the computer company he founded in 1984.

Microsoft said it was committed to the long-term success of the entire PC ecosystem and invested heavily in it for the future.

Michael Dell and private equity firm Silver Lake agreed to buy Dell for $13.65 a share, but the board said in a statement it was under pressure after investors complained the offer was too low.

However, with PC sales suffering a steep decline, it is unclear who will make a higher offer, according to the Telegraph.

Analysts said Michael Dell – who founded the company in the 1980s while a university student in Texas – is betting that taking the company private will make it easier to turn around.

In the face of a shrinking PC market, he is expected to re-organise the company to benefit from the more lucrative software and services market.

Haggling over share price

But the company’s second- and third-largest investors, Southeastern Asset Management and T. Rowe Price, opposed the deal because they say the company is worth $24 a share.

Dell shares are currently trading at around $14 which, although below the valuation by major shareholders, is still above the offer of the group led by Michael Dell.

The board said on Wednesday (7 March 2013) that any rival bids have to be made by 22 March 2013.

Analysts said Michael Dell and Silver Lake may need to raise their bid to $15 a share to win over the company's other shareholders.

Writing previously on the Dell buyback, Forrester analyst David Johnson said he did not expect the deal to have an adverse effect on businesses that use Dell equipment.

Johnson said the company’s strategy is to re-invent itself, changing from a PC and server supplier to an end-to-end systems supplier.

“PCs still make up a significant piece of the pie for Dell and they'll need the cash-flow to double-down on the areas where they can drive new value and differentiation," he said.


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