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Blackstone Pulls Dell Offer

Michael Dell may be the last man standing as he fights to take his company private.  Today, rival bidder The Blackstone Group dropped out.

It was David Johnson, formerly Michael Dell’s key turnaround executive, who led the Blackstone offer.  Johnson left Dell in January.  Today his group withdrew its bid, saying in a letter obtained by the Wall Street Journal that Dell’s outlook and finances are worse than they thought.

The other potential bidder, Carl Icahn, made a deal with Dell this week to limit his purchases of Dell stock to 10%--not enough for a takeover.

Dell’s stock dropped today, trading around $13.41 in mid-afternoon.  That price is less than Michael Dell’s $13.65 buyout offer, which shareholders will likely vote on soon.

Why the lower price? 

Analyst Jayson Noland, who covers Dell for Baird Research, said "the stock is trading below that offer price because the deal’s going to take some time to close and there’s always the outside chance that somebody gets cold feet and the deal collapses entirely."

Noland says a collapse of the deal is unlikely, but if it happened, it would probably come from Michael Dell's financial partner, Silver Lake, seeing what Blackstone saw and deciding either to pull out of the deal or to push for a lower purchase price.  Either way, Silver Lake would probably have to pay a sizeable penalty fee, Noland said.

Despite dropping out of the bidding, Blackstone will receive $25 million dollars from Dell Inc. to pay for Blackstone’s “due diligence” -- the time and effort the company spent evaluating the deal.

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