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Dell Reboots Takeover With Blackstone, Icahn Offers (Update 1)

Updated from 8:27 a.m. ET with additional commentary and data throughout.

NEW YORK ( TheStreet) -- The biggest private equity buyout since the financial crisis has received a reboot after Dell (DELL) said on Monday it has two new takeover proposal that trump a $13.65 a share offer the company struck with founder Michael Dell and private equity firm Silver Lake Partners in early February.

A special committee seeking a higher takeover price for Dell said that a consortium of investors led by the Blackstone Group (BX - Get Report) have submitted a $14.25 a share propsal that would allow Dell shareholders either to receive a cash payment at that value or continue to own their publicly traded holding. Francisco Partners and Insight Venture Management will participate in the Blackstone investor group.

Dell also received a $15 a share bid from Carl Icahn's holding company, Icahn Enterprises (IEP - Get Report), which will roll the activist investor's $1 billion stock stake into a takeover and use a mix of stock, debt and financing from Dell's factoring business to fund the deal.

To be seen is whether the Michael Dell-led consortium will try to improve on their February 5 offer to take the struggling PC giant private.

Were Michael Dell to remain a participant in negotiations, he will now have disclose his projections for valuing a bid notes Alex Khutorsky, a managing director at M&A advisory The Valence Group.

"Any competitor coming in with a bid between [Michael Dell's] own private bid and his public valuation for the company will force him to either give up the company or raise his offer and diminish the return."

The initial deal values Dell's shares at $24.4 billion and relies on over $12 billion in debt financing to go with an equity contribution from Michael Dell worth nearly $4 billion.

"We intend to work diligently with all three potential acquirers to ensure the best possible outcome for Dell shareholders, whichever transaction that may be," Alex Mandl, chairman of the Dell committee, said in a Monday statement.

According to the Blackstone-led group's offer, investment bank Morgan Stanley will lead debt financing for the takeover deal, however, the private equity firm didn't specify an exact financing need on its $14.25 a share offer.

The offer, which was sent on March 22 is signed by Chinh E. Chu and David Johnson of Blackstone, Robert A. Kindler, vice chairman of Morgan Stanley and David Fox and Daniel Wolf of law firm Kirkland & Ellis.

Icahn Enterprises' offer seeks to acquire up to 58% of Dell's shares and consists of about $4 billion in cash and an additional $1 billion by way of the company's recently acquired stock for a total of about $5 billion in equity.

Remaining sources of financing will consist of $7.4 billion of cash currently available at Dell, $1.712 billion in new factoring receivables and $5.218 billion in new debt.

"We understand that this Proposed Merger contemplates less total leverage on the Surviving Company than under the February 5 Merger Agreement," Icahn Enterprises noted in its offer.

Southeastern Asset Management and T. Rowe Price, two of Dell's largest independent shareholders that opposed the initial $13.65 a share February deal, would need to roll over their share holdings into the surviving company under the Icahn Enterprises offer.

Were investors to support Icahn's proposal, Icahn Enterprises would own 24.1% of Dell's remaining shares, while Southeastern and T. Rowe Price would hold 16.6% and 9.3% stakes, respectively.

Icahn's proposal references investment bank Jefferies as having advised the firms bid.

"I would find the Icahn deal less attractive," said Howard Ward, chief investment officer at Gamco Investors, in a CNBC interview when asked to contrast the Blackstone and Icahn Enterprises offers disclosed by Dell.

There are clear contrasts in the Silver Lake, Blackstone and Icahn bids, even if some details remain unclear.

Silver Lake's $13.65 a share offer is a full buyout, however, Blackstone's $14.25 offer and Icahn's $15 a share recapitalization will require a valuation of Dell's public equity. Such analysis may prove tricky given uncertainty as to whether founder Michael Dell will remain with the company or what its financial strength will be in the wake of a deal.
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