Michael Dell not to raise bid

Michael Dell and private equity firm Silver Lake Management will not raise their $24.4-billion bid for computer maker Dell Inc, Bloomberg today reported, citing people with direct knowledge of the situation.

Michael Dell will not sweeten the offer although shareholders are likely to veto the deal in its current form, and has been goaded by Dell's special committee to raise their offer.

In February, Michael Dell and Silver Lake offered to take Dell private for $13.65-per share, and they believe that they have made a fair offer. (See: Dell sells itself to Michael Dell and Silver Lake in a $24.4 billion deal)

The decision will set the stage for a fight over Dell with the company's second-largest shareholder, billionaire investor Carl Icahn, who has cobbled up a $5.2-billion debt financing to fund his attempt to scuttle Michael Dell's bid and take a shot at buying part of the company.

But Icahn's plan is more dangerous, according to analysts, who only see the investor breaking up the company and selling it in parts, leaving an unviable company to operate and run.

Icahn, with an 8.7-per cent stake, is proposing that the company buy back about 1.1 billion shares at $14 each, which would still leave a portion of Dell publicly traded,

Although the PC business is dying and Dell missed the tablet boom, the Texas-based company did see the coming of the cloud computing boom and invested around $14 billion in this segment.

According to Icahn, although that investment will pay off in the coming years, Dell has estimated a 15-per cent return on that investment - a return which Icahn thinks that Michael Dell wants to cash in by taking the company private at a bargain before these investments start paying off.

Analysts say, there may be some substance to the cloud computing investments, since Dell has invested heavily in this sector, but would an investor like Icahn be willing to wait for years to for returns on his investment, if at all.

Michael Dell, who has a 15.6 per cent stake in the company, had earlier said that Icahn's plans would bring the company under heavy debt and may not be able to withstand an economic or business downturn.

Michael Dell has also predicted that if shareholders veto his offer on 18 July, the stock is likely to fall to about $7.90 a share, the news agency said, citing a person with direct knowledge into his thinking.