Silver Lake's bid likely the best Dell shareholders get

Thu Jan 24, 2013 9:26pm EST
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By Greg Roumeliotis and Nadia Damouni

NEW YORK (Reuters) - A potential bid by private equity firm Silver Lake and its partners to take Dell Inc private is unlikely to be topped by other investors, people familiar with the matter said.

Silver Lake has a major advantage in having secured the backing of founder and CEO Michael Dell, who has a roughly 16 percent stake in the world's No.3 PC maker and would participate in the buyout consortium.

If Silver Lake clinches a deal with Round Rock, Texas-based Dell, this will result in a so-called "go-shop" period in which the company can actively seek offers from other potential buyers to ensure it has attracted the best possible offer.

But senior executives at the largest private equity firms competing with Silver Lake, speaking on condition that neither they nor their funds be identified, told Reuters on Thursday that they were unlikely to top Silver Lake's offer in any auction of the company.

"I just don't think it is doable to break up the current consortium. When management is rolling over (their stake) and they have picked a partner, it is hard to top the agreed offer," one of the private equity executives said. The executives also cited the lack of an exit strategy and sheer size of the deal.

A deal is imminent with Silver Lake and its partners, which include Microsoft Corp and Canada Pension Plan Investment Board, although the parties have yet to agree on a final price, two people close to the matter said.

Microsoft declined to comment while the pension plan did not immediately respond to a request for comment.

Microsoft's investment would come in the form of preferred equity that would later help pay down Dell's high-yield debt incurred as part of the leverage buyout, one of the people said.   Continued...

Dell Inc. founder and chief executive Michael Dell smiles during a business conference organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) in New Delhi March 22, 2011. REUTERS/B Mathur