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Dell Bidding War – Cramer’s Ultimate Winner

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Some of the smartest players on Wall Street are on the brink of a bidding war for Dell.

The company's board confirmed that it has now received two competing bids for the company; one from billionaire Carl Icahn and another from private equity titian the Blackstone Group.

Blackstone's offer comes in around $14.25 per share.

Icahn values his offer at $15 a share.

The new bids for Dell are both higher that the earlier bid from a consortium led by founder Michael Dell at $13.65.

A special committee has been appointed to review the new proposals; if it determines one or both are superior, the group led by Michael Dell will get one shot at revising the original bid.

"We continue to believe a higher bid than the current $13.65 per share offer will likely be offered but, based on our assumptions, a $15 per share bid may be a threshold," Wells Fargo Securities analyst Maynard Um said in a note.

Jim Cramer is baffled by these developments.

"How can this company which was worth about $14 billion in the public market be worth $26 billion in the private market?"

That is, why are these so-called smart money investors willing to pay such a premium for Dell? Three months ago, Dell was at $10.

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Although Cramer understands Michael Dell's motivations – Dell computer is his legacy – he just doesn't see why shrewd investors are bidding, aggressively.

"Margins are down. Cash flow from operations is down. Earnings are down and revenues are down," said Cramer. "To me this just seems insane. It's as if they just hate Michael Dell and are determined to have him pay up for his own company. Surely they don't mean to actually buy it, do they?"

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Cramer thinks at the end of the day the winner in this bidding war will be the parties that don't get Dell.

That's right – the losers will be the ultimate winners.

"I've see this happen a couple of times in my career where it was obvious that everyone had lost their sense, most recently with the Tribune Corp buyout."

Cramer just can't get the numbers to work

"I know that all three smart teams shouldn't theoretically be wrong. But the company's just not worth what they are paying unless they can fire everyone and still make the same revenues and profits. That's about what it will take. And that ain't happening," Cramer said.

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