December 6, 2023

DealBook: Dell Begins Campaign to Support Leveraged Buyout

Dell on Friday filed its definitive proxy materials with the Securities and Exchange Commission.Paul Sakuma/Associated PressDell on Friday filed its definitive proxy materials with the Securities and Exchange Commission.

Dell Inc. on Friday began its official campaign to support a proposed $24.4 billion sale of itself to Michael S. Dell and the investment firm Silver Lake, amid continued opposition to the deal.

The computer company filed its definitive proxy materials after receiving final approval from the Securities and Exchange Commission. And it set July 18 as the date for a shareholder vote on the transaction.

In a letter to shareholders, the company stressed that its special committee had carefully reviewed all possible alternatives to the $13.65-a-share offer by Mr. Dell and Silver Lake and fought hard to get to that price.

“Our analysis led us to conclude unanimously that a sale to the Michael Dell/Silver Lake group for $13.65 per share is the best alternative available — in a challenging business environment it offers certainty and a very material premium over pre-announcement trading prices,” the company wrote.

Dell also argued that a full sale eliminates shareholders’ risk of the company’s fortunes tumbling further, something that would not be possible if it pursued a huge stock buyback and dividend plan. That runs counter to what two of its biggest investors, Southeastern Asset Management and the billionaire Carl C. Icahn, have demanded.

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DealBook: Blackstone Drops Out of the Bidding for Dell

Dell’s founder, Michael S. Dell, and the investment firm Silver Lake are offering to take the company private in a $24.4 billion deal.Joe Raedle/Getty ImagesDell’s founder, Michael S. Dell, and the investment firm Silver Lake are offering to take the company private in a $24.4 billion deal.

10:25 a.m. | Updated

The Blackstone Group has walked away from the bidding for Dell, the computer maker confirmed on Friday.

The private equity giant, along with a separate bidder, the activist investor Carl C. Icahn, had been inspecting the books of the personal computer maker before deciding whether to make a rival bid to the $13.65-a-share offer to take the company private from the company’s founder, Michael S. Dell, and Silver Lake Partners, a technology-focused private equity firm.

Blackstone decided to withdraw after discovering that Dell’s business was deteriorating faster than it previously understood, according to a letter sent to the special committee of Dell’s board on Thursday. Among the reasons Blackstone cited include “an unprecedented 14 percent 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.”

The personal computer industry has been grappling with falling prices and with competition from smartphones and tablets. Its weakness was vividly illustrated by a report last week by the International Data Corporation that showed a sharp drop in global sales.

PC unit sales overall in the United States fell 12.7 percent in the first quarter from a year earlier, according to the report. At Dell, United States shipments were down 14 percent, while worldwide shipments were down more than 10 percent.

Blackstone, which had been working with the investment firms Francisco Partners and Insight Venture Partners, last month outlined an offer of more than $14.25 a share for control of Dell, but not for the whole company. Part of Dell, under that scenario, would still be publicly traded in what is known as a stub.

From the beginning, there had been dissension within Blackstone about whether it should pursue an offer, people close to the firm said. Blackstone, worried that they would be used as a stalking horse, negotiated with Dell’s special committee to reimburse the firm for its costs related to pursuing a bid whether it ultimately made a binding bid or not.

The withdrawal of Blackstone leaves Mr. Icahn as the only potential rival to the $24.4 billion buyout proposal from Mr. Dell and Silver Lake.  Shares of Dell fell more than 3 percent in trading on Friday morning.

On Tuesday, the Dell special committee announced that it reached an agreement with Mr. Icahn that limits his ownership stake in the company while allowing him to contact other shareholders about a possible bid for the computer maker.

Mr. Icahn has previously outlined an offer of $15 a share for about 58 percent of the company. Under that plan, he would have a 24.1 percent stake in 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,” Mr. Icahn said in a statement on Tuesday.

Mr. Icahn and Blackstone were the only two preliminary bidders to emerge last month from the special committee’s process of soliciting potential alternatives, in what is known as a “go-shop.”

On Friday, a Dell spokesman said, “As the board’s special committee continues to oversee its process to ensure the best possible outcome for Dell shareholders, we remain focused on our customers and on providing innovative products and solutions to help them succeed.”

Blackstone’s letter to Dell’s special board committee is below:

Boulder Acquisition Corp.
c/o Blackstone Management Partners L.L.C.

April 18, 2013

Special Committee of the Board of Directors of Dell Inc.
One Dell Way
Round Rock, Texas 78682
Attention: Alex Mandl, Presiding Director

Dear Alex,

I want to thank you, the Special Committee, and its advisors for inviting us into the process and for granting us due diligence access to Dell Inc. I also want to express our gratitude to Michael Dell and the management team for spending time with us and providing us with information and data relating to the business plan and financial forecasts of Dell.

You have asked for an update of our views after the intensive due diligence that we just completed. While we still believe that Dell is a leading global company with strong market positions, a number of significant adverse issues have surfaced since we submitted our letter proposal to you on March 22nd, including: (1) an unprecedented 14 percent 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; and (2) the rapidly eroding financial profile of Dell. Since our bid submission, we learned that the company revised its operating income projections for the current year to $3.0 billion from $3.7 billion.

For the reasons set forth above, among other reasons, on behalf of Boulder Acquisition Corp., Blackstone Management Partners, Francisco Partners, Insight Venture Partners, and Riverwood Capital, I regret to inform you that we will likely not pursue this opportunity. I would welcome the opportunity to speak to you to follow up on these matters and answer any questions that you may have.



By: /S/
Name: Chinh Chu

cc: Roger Altman, Evercore Partners

A version of this article appeared in print on 04/19/2013, on page B2 of the NewYork edition with the headline: Blackstone Is Said to Drop Out of the Bidding for Dell.

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DealBook: Icahn Ends His Battle With Lions Gate

Carl C. Icahn is selling his entire stake in Lions Gate.Chip East/Bloomberg NewsCarl C. Icahn is selling his entire stake in Lions Gate.

With his sights set on Clorox, the activist investor Carl C. Icahn is ending his long-running battle over control of Lions Gate Entertainment.

Lions Gate said Tuesday afternoon that Mr. Icahn had agreed to sell off his entire stake in the movie studio. The two parties also agreed to end all litigation between them, the company said in a statement.

Mr. Icahn first sought to buy all of Lions Gate in March 2010, after the company rebuffed his proposal to increase his stake to nearly 30 percent. Since then, Mr. Icahn and Lions Gate have continued to skirmish, with him making several revised bids and conducting and losing a proxy fight to put his five nominees on the company’s board in December.

Mr. Icahn pulled his last bid, of $7.50 a share, ahead of a December shareholder meeting. He had previously lost a court battle to prevent a Lions Gate director, Mark Rachesky, from exchanging debt for equity in a move that diluted Mr. Icahn’s stake to 33 percent from 38 percent.

In its statement, Lions Gate said Mr. Icahn and his son, Brett, had agreed to sell their stake of 44.2 million shares in the company at $7 a share, which it said was approximately the same as their cost basis in buying the stock.

Shares of Lions Gate closed down 3 cents on Tuesday at $7.52, but they later fell to $7.08 in after-hours trading after the company announced the agreement with Mr. Icahn.

Under the terms of the agreement, a Lions Gate company is buying about 11 million shares, while MHR Fund Management, which is controlled by Mr. Rachesky, is buying another 11 million shares. Lions Gate said it would designate one or more parties to buy up to 22.1 million remaining shares.

“We believe that this accretive and antidilutive transaction is in the best interests of all Lions Gate shareholders, and it allows the company to continue to focus on the execution of its long-term business plan,” Jon Feltheimer, Lions Gate’s chief executive, said in the statement.

As of late, Mr. Icahn has been preoccupied with his effort to either take over Clorox or force the company to sell itself in an auction. Mr. Icahn is seeking to replace the entire Clorox board in order to conduct the auction and said Tuesday that he would agree to buy the company for $78 a share if the auction did not produce at least that price.

Lions Gate, in its statement, quoted Mr. Icahn as saying, “As some have noted, my own ’slate’ is pretty full at the time, and I therefore determined that it is a good time to exit.”

Mr. Icahn has not yet responded to a call for further comment.

Perella Weinberg Partners served as outside financial adviser to the Lions Gate board, and Wachtell, Lipton, Rosen Katz and Heenan Blaikie served as legal counsel.

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DealBook: Dish Network Wins Blockbuster Auction

After a bankruptcy auction that extended into the early hours on Wednesday, Dish Network announced that it had emerged as the winner of Blockbuster’s assets, with a bid valued at $320 million.

Dish, the satellite television company, is set to pay roughly $228 million in cash, after accounting for certain adjustments. And the deal is expected to be completed in the second quarter.

“Blockbuster will complement our existing video offerings while presenting cross-marketing and service extension opportunities for Dish Network,” Tom Cullen, an executive vice president at the company, said in a statement. “While Blockbuster’s business faces significant challenges, we look forward to working with its employees to re-establish Blockbuster’s brand as a leader in video entertainment.”

The bankruptcy auction, which started in court on Tuesday morning, later moved behind closed doors with several potential buyers still in the running.

By late afternoon on Tuesday, three bidders remained: Dish Network; a group of liquidators led by Carl C. Icahn, a large Blockbuster investor; and a consortium of creditors known as Cobalt Video, a group that included Monarch Alternative Capital.

Cobalt, at the time, seemed to be the front-runner with a $308.1 million bid. Mr. Icahn’s group had made a $310.6 million offer, but it included rolling up existing debt holdings into a bankruptcy loan. Dish’s proposal was the lowest at $307.1 million, after other bidders dropped out of the process earlier.

But after the negotiations moved out of the court, Dish jumped to the front of the pack, with a bid valued at $320 million.

Dish has been an active acquirer, as its founder, Charles Ergen, looks to expand his digital empire. In March, the company agreed to buy the satellite operator DBSD North America for about $1.4 billion once it emerged from bankruptcy.

Mr. Ergen, through another venture, EchoStar, has been buying up debt in the satellite company TerreStar Networks. In February, EchoStar announced plans to buy Hughes Communications, the satellite Internet company, for $1.3 billion.

With Blockbuster, Mr. Ergen and Dish gain a large retail presence through which they can potentially sell services. In its press statement, Dish highlighted Blockbuster’s “more than 1,700 store locations,” as well as its “highly recognizable brand and multiple methods of delivery.”

The bankruptcy court will have to approve the deal.

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