The Blackstone Group L.P. (NYSE:BX) has reportedly ended up its bid for the troubled PC maker, Dell Inc. (NASDAQ:DELL). The declining margins for the PC Company and overall grim outlook for PC industry, were the main reason for the withdrawal of bid, reports Bloomberg.
The Blackstone Group L.P. (NYSE:BX) is the world’s biggest buyout firm and was in pursuit of acquiring Dell Inc. (NASDAQ:DELL) against the $24.4 billion joint bid by Michael Dell, along with Silver Lake management LLC. The bid offered by them jointly has been the largest offered leveraged buyout since the financial crisis. Dell committee received notification from the Blackstone that they are no longer bidding.
The Blackstone Group L.P. (NYSE:BX) lost its interest in the deal because the PC sales of Dell declined at a record rate globally for the first quarter. The largest buyout firm also studied keenly the financials of the company, which acted as a catalyst to the declining sales, according to the sources.
According to the sources, Blackstone has been taking advice from a large number of bankers, and buyout engineers along with the probable co-investors and consultants near Austin, Texas from April 8 to arrive at a suitable conclusion.
Alberto Moel, a technology analyst at Sanford C Bernstein & Co. in Hong Kong, said that there has been a downward price pressure on Dell, the margins have been low along with declining cash flow and the last priority of the company at this point of time is to get a leveraged buyout.
“You take a company private because you think you can do better; that you have some unidentified growth opportunity, or else ways to cut costs and improve margins. Dell has neither,” added Moel
Declining Margins & PC Demand Decline
In the last quarter of 2012, the operating margin of Dell Inc. (NASDAQ:DELL) declined 4.88 percent, a decrease from 5.81 percent in the corresponding period of last fiscal, according to the data of Bloomberg. Cash flow from operations also declined to $1.44 billion from $1.84 billion from the previous year period. The sales of the company declined 11 percent, to $14.3 billion.
The sales of the PC Globally declined 14 percent in the first quarter because of the increasing inclination of buyers towards the smartphones and tablet computers. The sales of PC units all over the world declined to 76.3 million, a decrease from 7.7 percent fore-casted by IDC.
The price The Blackstone Group L.P. (NYSE:BX) offered was at least $14.25 per share to current investors, and the investors could hold the part of their stake through equity stub. Billionaire activist investor Carl Icahn offered $15 per share in cash for acquiring 58.1 percent stake in Dell.
The original bid from Michael Dell and Silver Lake of $13.65 a share has been opposed for being too low, by some of company’s largest shareholders. To put pressure on the founder on increasing the bid, the PC maker revealed last month that the offers from Icahn and The Blackstone Group L.P. (NYSE:BX) are superior to that of Michael Dell and Silver Lake