Shares in Dell Inc dived to a 2-month low on Friday after Blackstone Group LP (BX.N) withdrew from a three-way battle to buy out the company, citing a crumbling personal computer market that has reduced financial forecasts at the world's No. 3 PC maker.
Its withdrawal eases the way for founder Michael Dell and Silver Lake to go ahead with a $24.4 billion deal to take the company private for $13.65 a share, in what would be the largest private equity-led buyout since the 2008 financial crisis.
Dell's stock fell 4 percent to close at $13.40, below that original offer price and the lowest level since February 6.
On Friday, Dell said its special committee, set up to review competing offers, was continuing discussions with both its billionaire founder and the other bidder, activist investor Carl Icahn, and still saw a deal closing by the fiscal second quarter.
The bid by Silver Lake and Michael Dell, however, has aroused the ire of major investors, including top independent shareholder Southeastern Asset Management, who complain that the offer undervalues the company.
Blackstone initially offered $14.25 a share. Icahn, who has taken a significant stake in the company, remains in the running and has proposed $15 per share for 58 percent of Dell.
It is unclear how Southeastern would respond. The fund management firm declined to comment.
Icahn, who is known for aggressively pushing for changes at companies he invests in, did not respond to requests for comment. But the Wall Street Journal cited a source "familiar with his thinking" as saying the billionaire investor will wait to see how shareholders vote on Michael Dell's bid.
If they reject his offer, Icahn would consider launching a hostile bid, the Journal cited the unidentified source as saying.
"I don't feel comfortable one bit that shareholders are getting a fair price," Don Yacktman, president of Austin, Texas-based Yacktman Asset Management, told Reuters on Friday.
Yacktman, whose firm owned 14.91 million shares of Dell, or a slightly less than 1 percent stake in the company as of December 31, said that while he is disappointed that Blackstone pulled out of the bidding, he is hopeful that Icahn's presence in the process will result in a better deal for shareholders.
"I would obviously like to see more players, but Dell still has to deal with Carl Icahn and Icahn can be a tough guy to deal with."
A private Dell
Blackstone's abrupt withdrawal a mere month after launching its bid is the latest twist in an increasingly complicated tussle over Dell, which began with a February announcement of Michael Dell's proposal to take his company private.
The self-made billionaire wants to take the company he founded in 1984 in a college dorm-room off public markets, hoping to transform it into a provider of enterprise computing services away from investor scrutiny. But shareholders complain such a deal deprives them of a chance to share in the future benefits of a successful overhaul.
"By being private, Dell can make many more strategic decisions, particularly around pricing to grow and upsell into its customer base," Um wrote on Friday.
"Being private also takes the customer discussion away from the operations of the company ... and will allow the company to focus on its products and solutions."
Some analysts have wondered whether Dell, which in the past decade has steadily ceded ground to its rivals in the global market, is as attractive a buyout target as a three-way battle would suggest.
Personal computer sales plunged 14 percent in the first three months of the year, the biggest decline on record, as tablets continued to gain in popularity and buyers appeared to be avoiding Microsoft Corp's (MSFT.O) new Windows 8 system, according to leading technology tracking firm IDC.
Dell was hailed as a model of production innovation as recently as the early 2000s, pioneering online ordering of custom-configured PCs and working closely with Asian component suppliers and manufacturers to assure rock-bottom costs.
As of 2013's first quarter, its share of the global PC market had slipped to 11.8 percent, behind Hewlett Packard Co (HPQ.N) and China's Lenovo Group Ltd (0992.HK).