Saturday, 25 October 2014
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Mar 28 2013 | 11:38am ET
The Blackstone Group may be willing to keep Dell Inc. founder Michael Dell at the computer-maker's helm, despite Dell's leadership of a rival bid for the company.
Dell, who is partnered with private-equity firm Silver Lake Partners and Microsoft on a $24.4 billion going-private buyout, has said he is willing to work with other would-be buyers in good faith. But Blackstone's interest in working with him seemed cool initially, and the private-equity giant had been speaking with potential replacements for Dell as CEO.
But Blackstone is now said to be open to keeping Dell, who in addition to serving as the company's CEO is also its largest shareholder. In addition to the sway his shares hold, Blackstone recognizes Dell's importance to the company and that the company's management does not want to part with its founder, which could push it to accept the Dell-Silver Lake offer.
While Dell may be open to working with Blackstone, there are hurdles to cooperation. Dell is dead-set against a sale of the company's financing unit, which Blackstone is said to favor, and does not want to work with the company's former mergers and acquisitions chief, David Johnson, who joined Blackstone in January. But Blackstone believes it may be able to do the deal even without selling the financing unit.
For his part, Dell is said to consider Blackstone's bid "management friendly" but ultimately weaker than his own offer. Either way, the presence of Blackstone's preliminary offer and another proffered by Carl Icahn is likely to extend the company's sale process for months.
While Blackstone may be willing to keep Dell whole if it buys the company, it was apparently unwilling to pay for its own due diligence. The p.e. firm demanded that the company reimburse its costs during the "go-shop" process, threatening to walk away if it wouldn't. Dell accepted that demand, with Silver Lake's approval, while also agreeing to pay Silver Lake's due-diligence costs.
Payments to both private equity firms will be capped at $25 million each, at Silver Lake's insistence. In addition, the reimbursement will come on top of the $180 million break-up fee Dell owes Silver Lake if it chooses a rival bid.
Icahn did not ask to be reimbursed and has not been given a similar deal.
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