Dell CEO Told to Boost Offer Value or Lose Chances of Going Private
July 3, 2013 11:13 AM
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ISS hasn't made a final decision yet, but the odds seem stacked against Michael Dell for now if he doesn't provide a better offer
The founder and CEO of Dell Inc. could
lose his company
if he doesn't heed the warnings of a special committee of the board.
Michael Dell, who founded Dell Inc. in 1984, is trying to take the computer company private, but Dell's second largest shareholder -- Icahn -- is making that a bit more difficult with an investment-backed proposal of its own.
Dell, which is being backed by buyout partner Silver Lake Management LLC in this process, was told to up his offer from $24.4 billion in order to secure approval from investor-advisory firm Institutional Shareholder Services (ISS).
Reports have said that ISS is leaning against Dell's offer unless he increases it. Neither Dell nor Silver Lake have said whether they'll do so or not yet, but Dell's special committee of the board is pushing for Dell to make a larger offer.
Billionaire Carl Icahn, on the other hand, revealed this week that he provided $3.42 billion (66 percent) of the debt financing for the bid. Icahn, along with investment bank Jefferies & Co, have secured $5.2 billion total.
ISS hasn't made a final decision yet, but the odds seem stacked against Michael Dell for now if he doesn't provide a better offer. Banks financing the transaction are reportedly working on a contingency plan to hike up the offer now.
Dell has had a whirlwind of problems aside from issues with going private. In May, the company reported a 79 percent
decline in profits
, with net income falling to $130 million from $635 million compared to the same quarter of 2012. This is mainly due to a shrinking PC market.
Dell has looked into many avenues to help his company go private, such as
dropping the value
of his 16 percent stake in the company from $13.65 a share to $13.36 a share.
Back in January, Microsoft also said it would
pour $3 billion
in order to help it go private and survive.
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7/3/2013 11:28:16 AM
Mike can just wait a few months to a year, and the company will gladly accept his original offer. Heck, they might even accept less. Dell isn't going anywhere but down right now. I don't blame a "declining PC market" for that. The PC market is fine. If MS thinks it can sell a $1200 glorified tablet, there's plenty of money to be had.
7/3/2013 11:55:44 AM
He won't be able to wait that long. While the company won't be worth that much in a year the offer already on the table is better than the one Michael Dell is making.
7/3/2013 12:11:40 PM
There's a decline in the consumer pc market. Dell is actually up 12% growth in the enterprise sector where the margins are higher. I think Dell posted revenue of $5.5bil in that.
BTW mentioning 79%(~$500mil) lower net profit is very misleading when you don't mention the 14.1bil revenue. If Dell increased their revenue by $700mil or just 5% increase and expenses remained the same then it would look like their profits jumped from $130mil to $830mil. You can say then they have 400+% jump in profits.
If Dell holds out, they're not going to lose value or go under. What Michael Dell wants to do is probably the same thing Jack the Ripper did back in the 80s and 90s with GE.
Trimming 10s of thousands of employees, selling off divisions, etc... reorganize and become lean. This is better done as a private company.
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