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How Not to Run a Bidding Process, Courtesy of Dell’s Board of Directors

Jeff Bailey

Dell (DELL) shares are up a miserable 7% since the board of directors at Dell announced February 5 that they had agreed to sell the company to founder/CEO Michael Dell and Silver Lake for $13.65 a share, or about $24 billion.

This despite two credible competing bidders, Blackstone (BX) and Carl Icahn, who are benefitting from having only to top the low-ball offer the Dell founder agreed to. Had the Dell board opened the bidding up for the company without a bid for potential acquirers to work from, the offers might have been higher. But given the board has already said they're willing to part with Dell for $13.65 a share, why should competing bidders go much higher? They'd be nuts.

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Southeastern Asset Management, Dell’s biggest outside shareholder, thinks the company is worth closer to $24 a share. That’s certainly self-serving, but no less so than the value Michael Dell and his hand-chosen board agreed to, one might assume.

We read now, in the Wall Street Journal, that Blackstone would be willing to entertain the notion of Michael Dell remaining CEO should Blackstone’s bid win out. In or out as a manager, at what price would Michael Dell decide to sell his shares, and at what price does he want to reinvest his shares in a buyout? That seems crucial information other owners might want. Being CEO has certainly been good for him, including $650 million in stock option gains, on top of his huge founding stake.

Here’s the Dell board of directors in case you want to congratulate them on their work so far.

The directors were paid between about $230,000 and $390,000 in cash and stock for their services to Dell in fiscal 2012.

Jeff Bailey, The Editor of YCharts, is a former reporter, editor and columnist at the Wall Street Journal and New York Times. He can be reached at editor@ycharts.com.

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