By Sean Williams, The Motley Fool
Filed under: Investing
I’ve always said investing takes a blend of skill and luck. Luck definitely shone in my favor in November when I picked up shares of PC-maker Dell the day after it reported third-quarter results that had Wall Street running for the hills.
In that report, investors saw a company that was in the midst of a very long transformation that was going to struggle with declining PC-sales as it pushed into information technology. What I saw was a company capable of producing billions in annual cash flow that already boasted a large net cash position, and that could be a potential takeover target. Little did I know how lucky I would be, because a few months later that takeover chatter would become a reality.
Three’s company
The initial deal offered by Silver Lake Partners for $13.65 per share didn’t sit too well with Dell’s largest shareholders — Southeastern Asset Management and T. Rowe Price Group , which together own 12.9% of all outstanding shares — and prompted activist investor Carl Icahn to make a sizable investment that led to the confidential opening of Dell’s books. Large shareholders criticized the deal for valuing Dell too cheaply with Icahn originally demanding Dell go into debt to pay out a $9 special dividend if the deal fell through. That all changed on Friday.
With three bids effectively on the table now — $13.65 from Silver Lake Partners, a minimum $14.25 per share offer from Blackstone Group , and an offer from Carl Icahn and Icahn Enterprises to purchase 58% of outstanding shares at $15 — things are about to get interesting. When all is said and done, one deal stands out to me, a Dell shareholder, as a clear winner.
Why the Silver Lake deal is yesterday’s news
The Silver Lake deal is essentially dead after these two competing bids emerged on Friday. Unless Silver Lake wishes to boost its bid — which could be more difficult now that Dell lowered its fiscal profit down to $3 billion for the year — or Michael Dell wants to dig more deeply into his own pockets (which seems very unlikely given that he was already utilizing his 16% stake in the company to finance the deal), then it’s as good as dead.
I think Icahn? Actually, I think not…
Carl Icahn‘s deal is intriguing from a shareholder perspective as it, on paper, appears to net the highest dollar amount per share, although we don’t yet know how high the Blackstone Group bid is willing to go. However, Carl Icahn‘s bid will only be for 58% of the company, exposing the remaining 42% to the public effects of a reduced earnings forecast and a discerning public eye that has been displeased with the pace of Dell’s turnaround.
This is the deal that makes sense
As a Dell shareholder, the Blackstone offer makes the most sense of all — and I feel …read more
Source: FULL ARTICLE at DailyFinance
