Dell Buyout Could Happen Next Week


Reuters reported this morning that Dell, the world’s third-largest personal computer manufacturer, could be close to a deal that would make the PC manufacturer private and take it away from public trading.

It’s speculated that an agreement could be announced as early as Monday. Silver Lake Partners, a private equity firm, and a group led by Dell’s CEO are expected to buy the company out.

A separate report published by Reuters cites two people familiar with the deal, saying that Michael Dell and business partners have been negotiating with the company at a price around $13 to $14 per share. Dell has yet to comment on the potential buyout.

If rumors hold true, Michael Dell could drum up between $500 million to $1 billion in equity financing. With his already 15.7 percent share of the company, estimated by Bloomberg to be valued somewhere around $3.45 billion, this could give him majority ownership of the new private firm.

Silver Lake Partners has negotiated with Barclays, Bank of America Merrill Lynch, Credit Suisse and RBC Capital to raise $15 billion in debt financing.

CNBC said last week that Microsoft could potentially contribute $1 to $3 billion to help finance the deal. Reported by the Wall Street Journal on Tuesday, it’s possible that Microsoft might want a little more pull in Dell’s business which might delay negotiations.

Although nothing is firm just yet, analysts expect that the parties involved are attempting to flesh out all the final details in an attempt to finalize the deal by this weekend. If all goes well we might very well see one of the largest buyouts in years, $24 billion by some estimates. But the details are still a bit sketchy and things could be delayed if Microsoft demands more than CEO Michael Dell and Silver Lake Partners are willing to agree to.

Dell Inc has had a hard time recently. They’ve been pushing to drive sales in a slow market and they’ve had to compete with rivals like Asus, HP and Lenovo. Taking the company private would allow Dell to focus on becoming a corporate technology leader and avoid any public scrutiny. The market shift in mobile devices is making it tougher for companies like Dell to stay ahead. This deal could be what the company needs to successfully reposition itself among the competition and changing market.

Others disagree that the move will benefit Dell. Shaw Wu, a Sterne Agee analyst, recently said, “The reality is that ever-increasing competition from Lenovo, Asustek, Apple, Google, Acer, IBM, HP, Samsung, and Cisco isn’t going away by going private…” Wu believes that Dell is still in the PC company mindset and because of the fundamental shift that the consumer electronics market has made, without substantial reform, Dell’s position isn’t going to improve. Wu estimated that 45 to 50 percent of Dell’s revenue comes from desktop and notebook sales, while another 20 percent comes from non-PC businesses that depend heavily on PCs.

A special committee of Dell’s independent directors and Evercore Partners has been formed to determine if shareholders will receive the best deal from the buyout, ensuring that not just Michael Dell, but everyone with a stake is treated fairly.

[Image via Flickr/Dell’s Official Flickr Page]