Blackstone Ends Dell Pursuit

Apr 19 2013 | 1:26pm ET

The Blackstone Group has dropped out of the bidding for Dell Inc., leaving Carl Icahn as the only potential alternative to a buyout led by Dell founder Michael Dell and private equity firm Silver Lake Partners.

Blackstone has spent a month  trying to cobble together a competing offer for the computer-maker while looking at its books. But the private-equity giant did not like what it saw, telling the special committee of Dell's board handling the sale negotiations that it was spooked by falling personal-computer sales and Dell's own declining operating income.

Blackstone in its letter noted "an unprecedented 14% market decline in PC volume in the first quarter of 2013, its steepest drop in history, and inconsistent with management's projections for modest industry growth."

Blackstone's pursuit of Dell had always been controversial within the company. Its biggest cheerleader was former Dell mergers and acquisitions chief David Johnson, who joined the p.e. firm earlier this year.

Blackstone's exit certainly improves the chances that the $24.4 billion going-private offer from Dell, Silver Lake Partners and Microsoft will succeed. Dell's stock price fell back below the $13.65 per share offer following the news. Blackstone's deal would have paid at least $14.25 per share, but only for part of the company.

Icahn is still working on a bid for Dell. This week, he and the company entered into an agreement capping his stake at 10% while allowing him to speak with other Dell shareholders about a possible bid. Icahn said he "retained the absolute right to conduct a proxy fight at Dell."

"My affiliates and I expect to engage in meaningful discussions with other Dell shareholders, discussions that we believe will help to facilitate alternatives to the existing transaction with Michael Dell," Icahn said Tuesday. Icahn's proposed bid would offer $15 per share for 58% of Dell.

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