Dell Inc. (NASDAQ:DELL) Now Looking a Tough Sell after Main Suitor Calls It Quits
Northern, WI 04/19/2013 (GDPInsider) – Dell Inc. (NASDAQ:DELL) , the PC maker who for years enjoyed solid growth and big profits is now facing an uphill battle to keep the company a going concern. CEO and founder Michael Dell has been trying desperately to seduce buyers in a bid to take the company private and for a while things looked pretty rosy. Even Microsoft joined the fray.
Dell’s biggest hope in the last few weeks was getting private-equity firm, Blackstone to agree a buyout at $13.65 a share. That possibility seems all but gone now that the company’s share price has fallen below that magic number. In today’s trading the stock opened at $13.44, only a shave of 1.54% below Michael dell’s proposal bid price, but a full 19.08% below the company’s 52-week trading high. And therein lies the problem.
Blackstone in explaining its exit cited certain issues that made it difficult for them to consummate the deal. The “number of significant adverse issues” cited by the private equity firm include the “unprecedented 14% market decline in PC volume;” something which clearly is making anyone having anything to do with PCs very nervous indeed.
On top of the general consumer aversion to all things personal computer, Blackstone was apparently also concerned that Dell as a company may be losing its financial credibility. The company’s downward-revised operating income from $3.7 billion to $3 billion was enough to cast doubt in the minds of the people at Blackstone.
The other hurdle
Dell’s bid to take the company private is being supported by private equity firm Silver Lake but standing firmly in their way is billionaire investor, Carl Icahn. Mr Icahn believes that the $13.65 offer being proposed grossly undervalues the company and he’s been locked in battle trying to get Dell and his cohort to raise the price.
Investors are meanwhile sitting on the sideline watching, waiting and hoping that the battle will push the share price through the roof. Indeed shares had climbed to a heady $14.43 in March on hopes that the clash of Icahn’s defiance and Michael Dell’s tenacity would continue. Unfortunately now that Blackstone has left the fray the company’s future is even more uncertain. The only thing certain, I suppose is that remaining public will leave Dell exposed, and this could be fatal.