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Dell Gets Higher Bids from Carl Icahn and Blackstone While Dollar General Beats and Raises Outlook

March 25, 2013 | About:
U.S. equity markets continue to hover around record territory and might get a push into record territory as a last minute deal was agreed to in Cyprus that would shut down its second largest bank and inflict losses on uninsured depositors in exchange for a 10 billion euro bailout. Despite the deal, markets continue to be modestly overvalued in my opinion. Two ratios I use to gauge market valuations is the overall Market-Cap/GDP valuation which indicates the market is set to return a measly 3% at current levels and the Shiller P/E which currently stands at 23, which is well above its historical mean of 16.5.

Special Situations

Things are certainly getting interesting over at Dell (DELL). If you have been following the story, Michael Dell and private equity firm Silver Lake Partners attempted to take the world’s No. 3 PC maker private at $13.60. As soon as the deal was announced, Dell’s largest shareholder, Southeastern Asset Management, sent several letter to the board of directors stating that the offer clearly undervalues the company. Other large shareholders agreed and soon Carl Icahn joined the fight as he pushed the company to issue a $9 special dividend and threatened years of litigation. As Friday’s “go shop” deadline approached, rumors started swirling that BlackRock (BX) had contacted former Hewlett-Packard CEO and current Oracle (ORCL) executive Mark Hurd to run Dell. Now that the deadline has passed, we know who the players are, as both Carl Icahn and Blackstone turned in preliminary bids which the board of directors would have to contemplate.

According to Reuters, Carl Icahn is offering $15 per share in exchange for 58% of Dell, while Blackstone is offering $14.25 a share. Michael Dell and Silver Lake are offering $13.50. Shares of Dell (DELL) had been trading at a premium to the original offer in anticipation of a higher bid. It’s unclear when the special committee will make a decision, but this was clear from the outset that it wouldn’t be easy for Michael Dell to take Dell private.

If the higher offers do go through, the Gurus who stand to benefit include:

Shares of Dollar General (DG) are up after the discount retailer reported EPS of $0.97 for its latest quarter versus analyst estimates of $0.90. While revenues were in line with analyst estimates, the bottom line beat was helped by increased food sales. At the same time, the discount retailer raised its outlook for the coming year and now expects EPS between $3.15 to $3.30.

Gurus who either established a new position or added to their position in the discount retailer in the last quarter include:

Finally, shares of Apollo Group (APOL) are significantly higher after the for-profit education providers reported EPS of $0.34 versus analyst estimates of $0.18. Apollo’s enrollment did see a small decrease but the market appears to be brushing it off. At the same time, Apollo’s board authorized a $250 million share repurchase program which has no expiration date.

Gurus who were bullish on Apollo and added to their positions include in the last quarter include:

Rating: 3.2/5 (10 votes)


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