Friday, April 19, 2013

Blackstone Withdraws From the Dell Auction[1]: Update

Blackstone Withdraws From the Dell Auction[1]: Update

Fear is replacing greed in the Dell saga.  Up until now, most investors have been trying to figure out how to drive the takeover price above Michael Dells’ bid of $13.65 per share.  While the level of interest in acquiring Dell has been limited, investors were optimistic that the presence of Blackstone and Carl Icahn would help to form a deal at a higher price.

Apparently, Blackstone is withdrawing because they concluded that Dell’s business is deteriorating more rapidly than they had first estimated.  This conclusion is based on Blackstone’s due diligence.  You’ll recall that Dell’s special committee agreed to pay for this due diligence.

While Mr. Icahn is still in the picture, I believe investors will now worry about Mr. Dell’s original proposal.  They’ve got to be wondering whether Silver Lake will remain committed to the deal.  Silver Lake just closed on a new $10 billion fund.  Are they still willing to make Dell the fund’s first investment?  They also have to be concerned about the willingness of the banks to lend Mr. Dell enough money to make his deal work.

A few weeks ago, investors were afraid that they would have Dell stolen from them at a cheap price.  Now they’re going to worry that Mr. Dell’s bid will soften or collapse and Dell’s stock will fall back into the single digits.


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