A frenzy of backroom negotiations was poised to begin on Monday after Dell Inc invited billionaire investor Carl Icahn and Blackstone Group to make firm takeover offers, potentially turning an existing $24.4-billion U.S. take-private deal into a starting bid for the number-three PC maker.
There were signs of behind-the-scenes attempts to forge alliances among players opposed to a leveraged buyout by private equity firm Silver Lake and the computer maker's founder, Michael Dell.
Icahn, the activist investor known to bid up prices in company auctions, said on Monday he has started preliminary conversations with Blackstone.
Dell declined comment, as did Silver Lake and Blackstone.
Icahn has proposed paying $15 U.S. per share for 58% of Dell. Blackstone has indicated it can pay more than $14.25 U.S. per share. The Silver Lake group offered $13.65 U.S. per share for all of Dell.
While the three offers are not directly comparable to each other, both the Icahn and Blackstone bids contemplate that some portion of Dell's shares would remain publicly traded, allowing shareholders such as Southeastern to retain some stake in Dell even after their contemplated deals.
The bids show how Silver Lake and Michael Dell, who reached an agreement last month to take the computer maker private for $13.65 U.S. per share, have seen their deal take an unexpected turn.
For a deal of this size, a "go-shop" period - during which the target company actively looks for rival offers - rarely yields competing offers. The new bids could mean the sale process could now drag out for months, leaving the future of Dell hanging in the balance.
Dell's shares rose 37 cents, or 2.6%, to close Monday at $14.51 U.S., indicating investors expect a deal to be done at a price higher than the $13.65 that the Silver Lake group offered. Earlier in the session they touched $14.64 U.S., the stock's highest level in 10 months.
However, late on Sunday, two sources close to the matter said that the Silver Lake group had no plans yet to increase or amend its offer until Dell's special committee comes out with a ruling on the rival proposals.
As part of his deal with the special committee of Dell's board that is running the auction process, Michael Dell has to explore the possibility of working with third parties on alternative offers. On Monday, Dell said he had reaffirmed that commitment.
Michael Dell considered Blackstone's bid to be friendly and was weighing the possibility of backing their offer, the New York Times reported on Monday.
Whether he would actually do so, though, is very much an open question. Blackstone has already made an aggressive push to recruit Oracle Corp President Mark Hurd to run Dell if it takes over the company.
A number of issues also remain to be addressed, one person familiar with the matter said of Michael Dell. Among them, what Michael Dell would do if a buyer wanted to sell a business and he did not, the source said.
Potential buyers are likely to want to sit down with Michael Dell to discuss his plans for a privately held Dell Inc in more detail, the source said, adding that Blackstone had not done so yet.
Switching bidding allegiances could preserve an affiliation with the company for Michael Dell, who founded the technology giant at the age of 19 with just $1,000 U.S.
Under the Silver Lake plan, he planned to contribute his roughly 16% share of Dell's equity to the deal, along with cash from his investment firm MSD Capital, and remain CEO of the company. Silver Lake is putting up $1.4 billion U.S.
The outcome of the auction would determine the future of Dell, which was regarded as a model of innovation as recently as the early 2000s but has struggled to make up for declining market share of the global PC market. As of 2012's fourth quarter, Dell's share of the global PC market had slipped to just above 10% from 12.5% a year earlier, according to research house IDC.
A source earlier said that Dell had slashed its internal forecast for fiscal 2013 operating profit to about $3 billion U.S.- down sharply from the $3.7 billion U.S. it had predicted previously. The source added that more details will be revealed in a proxy filing which is expected by the end of this week.
