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Blackstone pulls out of bidding for Dell over financial concerns

Warwick Ashford

Private equity group Blackstone has pulled out of the bidding for Dell because of falling sales and concerns over the computer company’s finances.

In March, Blackstone joined US billionaire investor Carl Icahn against Michael Dell in a bidding war over the company the latter had founded.

But now Blackstone has withdrawn because of concerns over an "unprecedented" drop in PC sales, although it said it still viewed Dell as a “leading global company with strong market positions”.

Since Blackstone submitted its bid, Dell has reduced its operating income projections for the current year to $3bn, down from $3.7bn, according to the BBC.

The bidding race is now between Carl Icahn and Michael Dell, who with private equity firm Silver Lake made a $24.4bn purchase offer in February in an attempt to regain control and reverse recent declines.

But the biggest shareholders were unhappy with the deal, which valued the company at $13.65 a share, well below their estimation of $24 a share.

Icahn entered the fray in support of the unhappy shareholders, offering to pay $15 a share in cash for as much as 58% of Dell’s stock, according to Bloomberg.

The company has said that Icahn’s proposed offer could be superior to the Silver Lake group’s deal for all of the company.

Icahn has said he will retain the right to start a proxy fight and seek to replace Dell’s directors with his own candidates.

But analysts said that is not likely to happen until after a vote by shareholders at an annual meeting, which has not been scheduled yet.

A majority shareholder vote in favour of the deal, excluding Michael Dell’s 15.6% stake, is required for approval of the joint offer with Silver Lake.

Analysts believe Michael Dell’s turnaround plan is based on shifting Dell’s business to software and services in the face of a shrinking PC market.


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