Michael Dell’s dreams of taking his company private are threatening to evolve into a hideous nightmare, after it was revealed that two separate bidders have entered the fray in a bid to wrest control of the company from its founder.

Dell’s Special Committee of the Board, which was setup to evaluate any other proposed bids for the company, confirmed this morning that it has received separate offers from two of the firm’s biggest shareholders – the investment firm Blackstone and activist investor Carl Icahn, both of whom have their own visions for the company’s future.

“The Special Committee, consisting of four independent and disinterested directors, has determined, after consultation with its independent financial and legal advisors, that both proposals could reasonably be expected to result in superior proposals, as defined under the terms of the existing merger agreement,” said Dell in a statement this morning.

“Therefore, each of the Blackstone and Icahn groups is an ‘excluded party’ and the Special Committee intends to continue negotiations with both.”

On the face of it, the two new offers seem to have blown Michael Dell’s original $13.65 a share proposal out the water, with Blackstone offering $14.25 a share, and Icahn valuing the firm’s shares at $15 each, reports Bloomberg. The company said that under the terms of the two proposed offers, some shares would continue to trade publicly, meaning that Dell wouldn’t go private after all. However, the statement adds that Michael Dell is willing to work on “alternative plans” with third parties, which hints that the company founder may well raise his offer to complete the buyout.

As Bloomberg reports, the challenges from Icahn and Blackstone are somewhat unexpected, considering that private equity firms are usually reluctant to get involved in bidding wars once a deal has been agreed. Michal Dell, who has teamed up with Silver Lake to finance his own bid, will likely be forced to up his own offer considerably if he wants to fulfill his ambition of regaining control of his company as he oversees its transition to a maker of software and data center hardware.

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Blackstone/Icahn’s Hostile Takeover

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The specifics of the proposals on the table are pretty messy, as the Wall Street Journal illustrates with its five possible scenarios on a Blackstone takeover. Essentially, Blackstone is proposing a leverage recapitalization deal that would give investors the option of trading in their stock for cash or equity, subject to a cap if they want to remain an investor in the firm. Blackstone plans to invite a number of Dell’s major shareholders to take part in the deal, while it’s also sounding out Insight Venture Partners to help fund its bid with a combination of equity and financing.

Meanwhile, Icahn’s offer is even more aggressive though, with shareholders being given the option of $15 a share in cash or the chance to roll over their stakes, though he has limited the transaction to $15.65 billion. This means that the offer is contingent on major shareholders like Blackstone, Southeastern Asset Management and T.Rowe Price Group contributing their own stakes without receiving a cash payment. Should Icahn use all $15.65 billion of his warchest, this would leave some 58.1% of Dell shares being acquired, with the rest remaining publicly traded.

Is Michael Dell Losing His Grip?

So what’s actually going to happen with this mess? Things are up in the air at the moment, though Dell’s special committee is yet to confirm if the rival offers are in fact better than Michael Dell’s. For now, the committee’s support for Michael Dell’s original offer remains in place, although the situation could well change in the coming days as further talks take place.

If that does happen and the committee decides that the either one, or both, of the rival offers are superior to Dell’s, the company founder could well find himself forced out of the company altogether (albeit significantly richer, thanks to his 14.4% stake), as it’s hard to imagine how he could continue in the role of CEO after seeing his dreams crushed in this way.

But then the alternative for Michael Dell doesn’t look all that enticing either – he could still up his own offer to satisfy the shareholders, but given how belligerent they have been (and Icahn’s own history) such a move would almost certainly be very expensive. Michael Dell may well be a very wealthy man, but Dell the company needs all the resources it can muster if it’s going to turn its fortunes around and be a success in the post-PC era.

In all likelihood, the outcome will depend on just how much Michael Dell really cares for the company he gave birth to. Dell’s future prospects in the hands of investors like Carl Icahn are questionable at best, according to SiliconANGLE founder John Furrier.

“It will be a shame if Michael Dell loses his company to a bunch of financial engineers that want to squeeze every penny out of the Dell assets.  Michael Dell wants to make a turnaround, whereas the new investors want to “gut” the company,” explains Furrier.

Given the precarious state of Dell’s PC business, which has seen profits fall by 19.3% to just $3 billion in the last 12 months, it seems highly unlikely that anyone except Michael Dell himself would be willing to take the company forward. Clearly then, there’s much more at stake here than just a bunch of shares – rather, it looks as if Dell’s very existence could be on the line.