Dell In Talks To Go Private
Dell computers, started by Michael Dell from his University of Texas dorm in 1984 may soon go private. At a Sanford C. Bernstein conference in June 2010, Michael Dell was asked whether he had considered taking the company private. He answered, “Yes.” Is the transition from public to private, finally being given serious thought after almost two and a half years?
Bloomberg reports that Dell has already discussed taking the company off of the publicly traded stock market. As a result, shares of Dell were up thirteen percent on Monday.
No one is happier about the potential for Dell to go private than public investors. As stated, shares of Dell moved sharply higher once news broke that Dell was considering a private route. While a buyout would not solve any of Dell’s innate problems, it could allow the company some leeway and cool-down to take other measures without nearby shareholders breathing down their every move. Before the announcement on Monday, Dell stock had been down more than 30 percent over the past fiscal year.
This type of move makes sense. Dell has certainly struggled a lot in recent years, losing about a third of its value in the last year. Its Q4 financial report of 2012 reported that Dell’s revenue was down seven percent and profits were down 34 percent.
Rumors say that the company has already talked to two leading private equity firms to help articulate the financial structure of the deal. However, the buyout is not guaranteed because it could fall apart if the proper finances aren’t secured or appropriate exit plans are realistically structured for the benefit of Dell.
According to the Wall Street Journal, a leveraged buyout could be worth in excess of $20 billion. Keep in mind that Dell also has $9 billion in debt. This type of buyout would make it one of the largest technology buyouts since Freescale Semiconductor was acquired for $17.6 billion in 2006.
As the leading shareholder of almost 16 percent, the CEO, Michael Dell still holds majority control over his beloved company.