Blackstone Group pulls out of the race for Dell

New York-based Blackstone pulled out just a month after it launched a challenge to the billionaire’s attempt to take Dell private.

In a letter published by a Dell board committee yesterday, Blackstone cited an unprecedented 14 per cent drop in industry PC sales in the first quarter of 2013 and a lower earnings forecast by Dell among the reasons for its withdrawal.

“Since our bid submission, we learned that the company revised its operating income projections for the current year to $3.0bn from $3.7bn,” Blackstone’s bidding group wrote in the letter.

The letter was published by Dell’s special board committee, handling all buyout-related matters.

Blackstone and activist investor Carl Icahn, who has taken a significant stake in the company and opposes Michael Dell’s buyout, had made preliminary offers to the company challenging the deal with Silver Lake.

Icahn’s chances of a successful rival offer are viewed by analysts and investors as slimmer than Blackstone’s, yet the deal with Silver Lake still faces significant opposition from some Dell shareholders, including South-eastern Asset Management, the activist investor that owns 8.4 per cent of the company.

Icahn and Blackstone each offered alternatives that would keep part of the company public. Icahn has proposed paying $15 per share for 58 per cent of Dell, while Blackstone had indicated it could pay more than $14.25 per share for the whole of Dell.

Both deal structures involve saddling the company with a good deal of debt and keeping it on public markets. Silver Lake’s $13.65 per share all-cash offer would see Dell go private.

Dell said on Tuesday Icahn had agreed not to raise his stake in the company to more than 10 percent, and that he could team up with other shareholders on a potential bid for the personal computer maker.