Depending on who you listen to, Dell, once the world’s largest PC vendor
fallen on hard times, could have a deal to go private through a leveraged
management buy-out in place in the next six weeks (The Wall Street
Journal) or in the next week or two (CNBC).
On the other hand, Toni Sacconaghi, the ace Sanford Bernstein analyst,
thinks the whole exercise will come to naught because of the sheer size of
the ~$22 billion-$25 billion deal, one of the biggest LBOs of all time.
Besides the size of the deal, he says, “you have a pretty risky environment
in the sense that the PC marketplace is going through a lot of change right
now.”
The last word out of CNBC Tuesday was that Dell could be taken out for
$13.50-$14 a share, not the premium that most of the Street seems to be
anticipating. The Wall Street Journal waded in later agreeing.
Silver Lake Partners is apparently the key private equity house Dell has been
negotiating with for the last two or three months. The other name that has
come up is TPG Capital.
The two might team to buy $2 billion in equity in Dell. Sacconaghi think it
would take $4 billion.
There’s reportedly no formalized bidding group yet. A sovereign wealth or
pension fund could get involved. The Wall Street Journal says JP Morgan
Chase is managing “the deal process” apparently as an advisor.
According to CNBC the $15 billion debt financing is oversubscribed.
Reuters says at least four major banks have been lined up by Silver Lake:
Credit Suisse, Bank of America Merrill Lynch, Barclays and the Royal Bank
of Canada.
Because of Michael Dell’s nearly 16% ownership position in the firm,
worth maybe $3.6 billion, he’s assumed to be in. Because of that conflict of
interest stockholders have no guarantee of getting the best price. He may be
kicking in additional financing perhaps from his multibillion-dollar personal
investment fund.