Blackstone Withdraws From Dell Buyout Race

Investment firm Blackstone Group has reportedly dropped its interest in taking Dell private, citing the large decline in the global PC industry.

Blackstone had mounted its own challenge back in March to compete with the $24.4 billion (£16bn) offer on the table by a group led by founder Michael Dell, who wants to take the company private backed by finance firm Silver Lake Partners, and Microsoft.

Blackstone Withdraw

Blackstone was reportedly heading up a rival group that was hoping to make its own bid for Dell, which currently is the world’s third-largest PC maker, behind HP and Lenovo.

Such a move would have placed additional pressure on Michael Dell and Silver Lake Partners to increase the amount of their own offer, something they have been reluctant to do despite fierce criticism from a number of shareholders.

Blackstone apparently withdrew from the race because of the worrying state of the PC market. According to Reuters, which cited three people familiar with the matter, Blackstone pulled out citing an unprecedented 14 percent drop in industry PC sales in the first quarter of 2013.

This came after researcher IDC revealed the dire state of the global PC market earlier this month, when it said that PC sales during the first quarter of this year were the lowest it had ever seen, since it started keeping records.

Blackstone was also reportedly put off by a lower earnings forecast by the Dell management, which saw operating income drop from $3.7 billion (£2.4bn) to $3 billion (£2bn) in the current fiscal year.

In February Dell posted revenues that fell 11 percent in the company’s fiscal fourth quarter – to $14.1 billion (£9.1bn). Profits during the three months also declined 31 percent, to $530 million (£343m).

Company transformation

Since his return to Dell back in 2007, Michael Dell has become increasingly frustrated at the inability to make major strategic changes at Dell whilst it still is exposed to the harsh scrutiny of Wall Street, coupled with the additional pressure of having to hit quarterly financial numbers because it is a publicly listed company.

Michael Dell has been aggressively trying to reposition Dell away from being a PC and server box maker, and into an all-inclusive enterprise IT services vendor. As part of this company transformation, he announced on 5 February his intention to take Dell private again in a $24.4 billion (£16bn) offer in conjunction with Silver Lake and Microsoft.

But some were not happy at the deal, including some of Dell’s largest shareholders. Southeastern Asset Management and T.Rowe Price, which together hold about 13 percent of Dell shares criticised the deal, which would pay investors $13.65 (£8.84) per share, a 25 percent premium over the share price in January when the buyout rumours first emerged.

These shareholders are arguing for a price that is more than $20 (£13.12) per share.

The deal also has come under further criticism from activist investor Carl Icahn, who soon bought enough shares to bring his share up to 6 percent. Icahn has advocated that the company remain public and pay out a special dividend.

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