*from www.bloomberg.com, April 1, 2013 (To view original article click here.)
Take Away #1: Dell Inc. founder Michael Dell will only consider backing a buyout by Blackstone Group LP if the firm guarantees he can remain as CEO.
Key Facts and Figures:
- In several recent meetings with the Blackstone executives overseeing the firm’s bid, Michael Dell said he would be more likely to support their proposal if he retained an influential role.
- Negotiations are ongoing and the two sides may not reach an understanding.
Take Away #2: Michael Dell is now using his stake as leverage to preserve his leadership position as the company weighs competing.
Key Facts and Figures:
- Michael Dell said on Feb. 5 that he agreed to take his company private in a $24.4 billion transaction with Silver Lake Management LLC.
- Michael Dell is now using his 15.6% stake as leverage to preserve his leadership position as the company weighs competing offers from Blackstone and billionaire investor Carl Icahn.
- If another bid is superior and bars him from future involvement, CEO Dell would cash in his shares and walk away, leaving the buyer to replace about $4.5 billion in financing he could have contributed.
Take Away #3: Michael Dell could drop out of the joint bid with Silver Lake to back an alternative proposal.
Key Facts and Figures:
- Blackstone initially assumed Michael Dell wouldn’t participate in the buyout with the firm.
- Silver Lake, until a few days ago perceived Michael Dell as hostile to Blackstone’s proposal.
- Silver Lake now considers it possible that the CEO will drop out of its joint bid to back an alternative proposal.
- CEO Dell didn’t inform Silver Lake of his recent meetings with Blackstone, one person said.
Take Away #4: Offers from Blackstone and Icahn could end up being superior to the $13.65 a share buyout planned by Michael Dell and Silver Lake.
Key Facts and Figures:
- Michael Dell and Silver Lake’s buyout proposal requires approval from a majority of shareholders excluding the CEO himself.
- The company’s biggest outside investors has criticized that proposal as too low.
- Blackstone’s plan values Dell at more than $14.25 a share.
- Icahn would pay $15 a share in cash for as much as 58.1% of the stock, Dell said on March 25.
Take Away #5: Michael Dell plan was to retool Dell as a maker of data-center gear and software for corporations without the scrutiny of public investors.
Key Facts and Figures:
- Under both Blackstone and Icahn’s plans some shares may continue to be publically traded.
- Icahn’s proposal wouldn’t require Dell’s involvement.
- Blackstone’s discussions with Michael Dell have been constructive, one person said, and the Blackstone hasn’t indicated that it want to replace him.
- Blackstone had approached Oracle Corp. President Mark Hurd about running Dell, a person familiar with the matter told Bloomberg.
Take Away #6: After Silver Lake said in August that it was interested in pursuing an LBO, Michael Dell approached KKR & Co. and TPG Capital about a possible deal.
Key Facts and Figures:
- Michael Dell called KKR & Co. co-founder George Roberts to see if the firm might also look into a deal.
- Michael Dell has known Roberts for years but KKR evaluated Dell and eventually dropped out.
- CEO Dell also met with TPG Capital’s David Bonderman and John Marren in late December.
- TPG said no twice, once last year and again during the go-shop period when the computer maker had an opportunity to solicit alternatives to the buyout by Michael Dell and Silver Lake.
Take Away #7: Negotiations for a possible buyout of Dell Inc. were kicked off in June by the Company’s largest outside investor, Southeastern Asset Management Inc.
Key Facts and Figures:
- Initial discussions included Southeastern, company executives, a special committee of the board, Silver Lake and their respective financial and legal advisors.
- CEO Dell told his board that going private would be the best course of action.
- CEO Dell said it would let him boost spending on acquisitions, sales staff and R&D, while investing in PCs and tablets and expanding Dell’s reach in emerging countries.
- Undertaking those investments while trading on public markets would be “poorly received” by investors since they would “weaken earnings and cause greater volatility” in the stock price, said Dell.
- Dell’s shares fell less than 1% to $14.29 at 9:32 a.m. in New York.
- Dell’s shares are trading at about 4.7% above the original buyout price.
Take Away #8: Silver Lake came close to walking away from the deal in January and was in the midst of a stalemate until it upped its final offer by 5 cents a share at the eleventh hour.
Key Facts and Figures:
- That upped offer ultimately boosted the bid 22% from $11.22 at the outset.
- On July 17, Michael Dell met a representative of Silver Lake at the Fortune Brainstorm technology conference in Aspen, Co., and they arranged to meet again in August.
- In mid-August Dell told Alex Mandl, the company’s lead independent director, that he was interested in possibly taking the company private, asking for information to study the feasibility of a leveraged buyout.
Take Away #9: The board was open to the idea of a leveraged buyout and in late August the company reported revenue of $14.5 billion.
Key Facts and Figures:
- The reported revenue was of $14.5 billion was about $800 million less than the board had forecast in June and $300 million below a revised outlook.
- By the end of August, the board had retained law firm Debevoise & Plimpton LLP and JPMorgan Chase & Co. as its advisers.
- By early September, the company had entered into confidentiality agreements with Dell, Silver Lake and a second private equity firm identified as “Sponsor A”.
- “Sponsor A” is KKR, according to a person with knowledge of the matter.
- On Oct 23, when Dell’s share price closed at $9.35, Silver Lake and KKR submitted preliminary, non-binding proposals to acquire the company.
- Silver Lake bid $11.22-$12.16 a share for all stock excluding that of Michael Dell, whose collaboration was a condition of the offer.
- Sponsor A bid $12-$13 for all shares except Dell’s and Southeastern’s, and suggested an additional $500 million investment on Michael Dell’s part.
- On Nov. 15, Dell reported quarterly earnings that missed analyst’s expectations and its own guidance again, causing shares to drop about 7.3% to a three-year low to $8.86.
- By then it had hired Goldman Sachs Group Inc. and Boston Consulting Group Inc. as advisers.
Take Away #10: In November Silver Lake and Sponsor A submitted revised bids, and on Nov. 30, Dell expressed his enthusiasm for an LBO to the board.
Key Facts and Figures:
- Boston’s research later underscored the decline in Dell’s business, predicting the division that includes PCs would decline by as much as $10 billion in four years.
- On Dec. 3, Goldman Sachs analysts wrote a report suggesting that Dell might be the target of an LBO, sending the company’s shares up 4.4% to $10.06.
- That same day Sponsor A withdrew from the process, later citing the uncertain market for personal computers and competitive pressures on Dell.
- The following day, Silver Lake submitted a revised bid of $12.70 per share.
Take Away #11: On Dec. 10, the board told Silver Lake any bid would have to be significantly higher.
Key Facts and Figures:
- At that point Silver Lake said it would need to seek financing from Microsoft Corp.
- That month, TPG – identified in the proxy only as Sponsor B – also signed a confidentiality agreement with Dell.
- On Jan. 16, Silver Lake submitted a bid of $12.90 per share, backed by commitments from Barclays Plc, Bank of America Corp., Royal Bank of Canada, and Credit Suisse Group AG, as well as $2 billion form Microsoft.
Take Away #12: The board balked at Silver Lake’s bid of $12.90 per share and said it would support a bid of $13.75 per share.
Key Facts and Figures:
- Silver Lake responded that it could offer no more than $13.25, though it raised that to $13.50 later in January.
- Dell lowered the valuation of his rollover shares to $13.36 so that Silver Lake could raise its bid to $13.60.
- On January 24, Dell advisers received calls from Blackstone, Southeastern and a so-called Strategic Party A, expressing interest in all of part of the company.
- The unidentified party is General Electric Co., which sought Dell’s financial services division, a person with knowledge of the matter said.
Take Away #13: Silver Lake raised its big to $13.65 per share on Feb. 4 and Dell’s board finalized the merger agreement, which included a go-shop period.
Key Facts and Figures:
- During the go-shop process, Evercore Partners Inc. contacted 67 parties.
- Those parties included 19 potential strategic bidders, 18 financial sponsors and 30 others, including sovereign wealth funds.
- Four others expressed interest unsolicited.
- Altogether, 11 parties were open to a transaction, but only three — Icahn, Blackstone and Strategic Party A — submitted proposals by the end of the go-shop process on March 23.
- Two days later, the board said it would support the merger agreement with Silver Lake while continuing negotiations with Blackstone and Icahn.
- Michael Dell’s employment agreement with the Silver Lake group entails a stock-option grant with an aggregate exercise price of $150 million.
- The company didn’t give an estimate of the value of those options, which have a 10-year term.
- Michael Dell has agreed to forfeit the options he currently owns in the company.
- The Silver Lake group may strike employment agreements with the company’s other top executives and let them invest in the new company.
Take Away #14: Blackstone is proposing a leveraged recapitalization transaction whereby investors could choose to get either all cash or equity, subject to a cap, if they want to stay invested in Dell.
Key Facts and Figures:
- The shares would continue to be publicly traded.
- Blackstone, which has teamed with Francisco Partners, and Insight Venture Partners, said it plans to fund the transaction with a combination of equity and debt, in addition to Dell’s cash and equivalents.
Take Away #15: Icahn is offering shareholders the option to roll over their stakes or receive $15 a share in cash, with the amount of cash limited to $15.65 billion.
Key Facts and Figures:
- Icahn has enlisted Jeffries LLC to conduct due diligence.
- Icahn’s offer assumes that Southeastern and T. Rowe Price Group Inc., the largest Dell investors after Michael Dell, would contribute their stakes and won’t receive cash payment.
*To view original article from www.bloomberg.com click here.