Counterparties: Dude, you’re getting a bidding war

March 25, 2013

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Dell might not be Michael Dell’s much longer. Dell has teamed with private-equity firm Silver Lake to buy the company he founded for $13.65 per share, or $24.4 billion — but now Blackstone and Carl Icahn have each submitted rival bids. Those bids are both worth slightly less than $15 a share, the WSJ reports. If either is successful, Michael Dell is likely to find himself far less powerful at his own company — or even out of a job entirely.

The WSJ’s David Benoit has a great side-by-side comparison of the three competing offers, and breaks out six different scenarios for a deal to be done.

Under a “go-shop” provision in the initial deal, Dell’s board was allowed to freely seek competing offers; in fact, the board owes a fiduciary duty to Dell shareholders to get the best deal possible. Steven Davidoff notes the Dell board can only keep talking to the rival bidders if they “conclude after consultation with outside counsel and its financial advisers that one offer, or both, could reasonably be expected to result in a superior proposal”.

According to Reuters’ Jessica Toonkel and Greg Roumeliotis, Dell’s board thinks the new bids might indeed be superior to Michael Dell’s. It’s unclear whether leaking that view to the media was intended to provoke an improved bid from the founder.

When it comes to putting a price on Dell, Roben Farzad points out one wild card: the company’s 3,449 patents (with another 1,660 pending). Those patents are surely worth something, but as patent expert David Pratt says, their value “is often misunderstood and difficult to price”. Which is surely catnip to the hundreds of bankers and lawyers advising three private equity firms, a corporate board, and Michael Dell himself. – Ben Walsh

On to today’s links:

TBTF
Who wants to break up big banks? The Senate apparently – Suzy Khimm

EU Mess
Why the Cyprus crisis isn’t over yet – Felix
“I call this Cyprus leaving the euro but keeping the word “euro” to save face” – Tyler Cowen
After Cyprus, the “unrestricted movement of capital is looking more and more like a failed experiment” – Krugman
“Do capital controls make a mockery of the concept of a currency union? Yes, obviously” – Joseph Coterill
The Dutch financial minister commits a Kinsley gaffe about Cyprus – Tim Fernholz
“As soon as the money leaves, the people who go to restaurants, buy cars and buy property leave too” – FT

Housing
Cash buyers (read: mostly investors) account for about one-third of all U.S. homes sales – WSJ
The connection between single-family housing starts and the unemployment rate – Calculated Risk

Popular Myths
Why meritocracy is a terrible idea – Matt Yglesias
Please remember that the benefits of college aren’t entirely economic – Evan Soltas

The Fed
Bernanke: Don’t worry about currency wars – Calculated Risk

Alpha
The sell-side research industry is maybe, possibly worrying about Twitter – Joe Weisenthal

Right On
A blacklist of business jargon – Bryan Garner

New Normal
One of the fastest growing unions in the US doesn’t negotiate wages, but it does provide healthcare – NYT

Oxpeckers
Punditry in financial media, in one hilarious screenshot – Floating Path

Crisis Retro
Employees at Bear Stearns and Lehman also made really bad personal mortgage decisions – WSJ

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