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Michael Dell Mulls Options for Taking Company Private

Dell Inc. founder Michael Dell will only consider backing a buyout by the Blackstone Group LP (BX) if the private-equity firm guarantees he can remain as chief executive officer, according to a person familiar with the discussions.

In several recent meetings in Austin, Texas, with Chinh Chu and David Johnson — the Blackstone executives overseeing the firm’s bid — Michael Dell said he would be more likely to support their proposal if he retained an influential role, a second person familiar with the talks said. Negotiations are ongoing and the two sides may not reach an understanding.

Michael Dell said on Feb. 5 that he agreed to take his company private in a $24.4 billion transaction with Silver Lake Management LLC. He’s now using his 15.6 percent stake as leverage to preserve his leadership position as the company weighs competing offers from Blackstone and billionaire investor Carl Icahn, said one of the people, who asked not to be named because the talks are private.

If another bid is superior and bars him from future involvement in the company, CEO Dell would cash in his shares and walk away, leaving the buyer to replace about $4.5 billion in financing he could have contributed, one person said.

Blackstone had initially assumed Michael Dell wouldn’t participate in a buyout with the firm, according to one of the people. Silver Lake, which until a few days ago perceived Michael Dell as hostile to Blackstone’s proposal, now considers it possible that the CEO will drop out of their joint bid to back an alternative proposal, another person said. Michael Dell didn’t inform Silver Lake of his recent meetings with Blackstone, one person said.

David Frink, a spokesman for Dell, couldn’t be reached for comment. Peter Rose a spokesman for Blackstone, and Charlotte McCrum, a Silver Lake spokeswoman at Brunswick Group, declined to comment.

The offers from Blackstone and Icahn could end up being superior to the $13.65-a-share buyout planned by Michael Dell and Silver Lake, according to a statement last week from Dell. Silver Lake and Michael Dell’s buyout proposal — which requires approval from a majority of shareholders excluding the CEO –has been criticized by the company’s biggest outside investors as too low. Rival bidders had a deadline to put forth alternatives, and the company has said it’s open to working with third parties on new proposals.

The challenges to the original bid, which came as Dell struggles to catch up with a new wave of nimbler competitors in mobile computing and business services, mean Michael Dell could lose control of the firm he founded in his Texas dorm room. His plan was to retool Dell as a maker of data-center gear and software for corporations — without the scrutiny of public investors.

Blackstone’s plan values Dell at more than $14.25 a share, while Icahn would pay $15 a share in cash for as much as 58.1 percent of the stock, Dell said March 25. Under both plans, some shares may continue to be publicly traded. Icahn’s proposal wouldn’t require Dell’s involvement.

Blackstone’s discussions with Michael Dell have been constructive, and the private-equity firm hasn’t indicated that it wants to replace him, one person said. Blackstone had approached Oracle Corp. (ORCL) President Mark Hurd about running Dell, a person familiar with the matter told Bloomberg last month…

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