Hedge Funds | Mergers & Acquisitions | March 29, 2013, 4:04 pm

The Path to a Three-Way Race for Dell

By MICHAEL J. DE LA MERCED

Though the race for Dell Inc. now has narrowed to three contestants, there were many more who arose over a month ago.

Advisers to Dell directors spoke to 71 potential bidders during a 45-day period aimed at flushing out alternatives to a $24.4 billion offer by Michael S. Dell and the investment firm Silver Lake, according to a securities filing by the company on Friday.

The long-awaited proxy filing includes one of the lengthiest recaps of a merger’s history in recent memory, detailing over 26 pages the months-long negotiations that led to the Dell transaction. But it especially shines a light on the 45-day “go-shop” period, which wrapped up last week with two preliminary bids by the Blackstone Group and the billionaire Carl C. Icahn.

Dell is expected to point to the efforts recounted in the proxy as proof that its board fought hard to find the best possible outcome for shareholders, as several investors continue to fight the existing $13.65-a-share bid by Mr. Dell and Silver Lake as far too low.

According to Friday’s filing, bankers at Evercore Partners began reaching out to a panoply of possible strategic and financial buyers shortly after the deal with Mr. Dell was signed on Feb. 5. In total, the investment bank spoke to 21 other companies, 20 private equity firms and 30 other potential investors.

According to the filing, several potential suitors ultimately were rejected because they were interested only in a piece of Dell’s businesses. A special committee of the company’s board was primarily interested in selling the company as a whole, mirroring the proposal by Mr. Dell and Silver Lake.

On Feb. 6, Blackstone contacted Evercore, saying it was interested in participating in the go-shop process. The private equity giant had already expressed interest in potentially bidding for Dell the previous month, after word of the company’s deal deliberations emerged in the press.

A month later, Blackstone, together with potential partners, met with Mr. Dell to further discuss a potential bid.

Other private equity shops emerged as well. The filing names a “Sponsor B” that had previously held discussions with Dell directors late last year, willing to take another look at the company despite passing on making a bid the first time. People briefed on the matter identified that firm as TPG Capital.

Ultimately, TPG decided again not to participate in any bids.

A “Sponsor C” also expressed preliminary interest, but ultimately decided to walk away after inspecting Dell’s books.

A corporate bidder, identified as “Strategic Party A,” contacted Evercore on Feb. 8 to say it was interested in information about Dell’s financial services arm. That company — which people briefed on the matter said was General Electric‘s GE Capital — later expressed interest in working with whatever group Blackstone convened to make a bid.

At least three other strategic buyers sought to gain access to Dell’s books. Most were denied access because they appeared interested in only bidding for part of the company.

Mr. Icahn, who had amassed a position in Dell, first contacted Evercore on Feb. 26 about signing a confidentiality agreement. Over a week later, the billionaire wrote to the Dell special committee, disclosing owning a “substantial” stake and warning that he would fight the proposed takeover by Mr. Dell.

By March 11, Dell advisers gave Mr. Icahn access to Dell’s private financial information.

By the go-shop’s deadline of March 22, Evercore bankers received three expressions of interest. One was from GE Capital, proposing to buy Dell Financial Services only if combined with any takeover proposal, including Mr. Dell’s.

Blackstone also submitted an offer, now known to be over $14.25 a share and which would leave an unspecified portion of Dell public to let investors continue owning a piece of the company if they so wished. The firm disclosed that it was working with Francisco Partners and Insight Venture Partners.

In a twist, however, Blackstone demanded that the Dell special committee reimburse the costs of assembling that rival bid, up to $25 million. That request was granted on Monday.

Mr. Icahn submitted his offer, in which he would buy about 58.1 percent of the company for about $15.6 billion, or $15 a share. His offer envisioned several major shareholders, including Southeastern Asset Management and T. Rowe Price, contributing their stakes as well.

Privately, some Dell advisers considered Mr. Icahn’s proposal a non-starter and a place-holder to keep negotiating with the special committee, according to people briefed on the matter. The hedge fund manager has said that he is reviewing Blackstone’s offer as well, leaving the door open to joining that other consortium.

A version of this article appeared in print on 03/30/2013, on page B3 of the New York edition with the headline: Filing Shows Twisting Path To Three-Way Race for Dell.

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