Taking Dell off NASDAQ could cost Michael Dell & partners $22bn
In the tech world, rumors are a daily occurrence but this one regarding Michael Dell and his move to take the company bearing his name private is gaining momentum, and a big sticker price.
There isn't a day that doesn't go by that tech bloggers are flooded with all kinds of rumors, but there has been one floating around lately that has a lot of tech pundits just a little bit excited.
The rumor is that Michael Dell is in some pretty serious talks with private equity firms about taking the company that bears his name out of the NASDAQ, and return it to being a private company. Apparently part of the reasoning behind this move, according to analysts, is that as the third largest PC maker in the world Dell is extremely concerned about declining sales; and is looking to transform the company.
As a public company this would be extremely difficult as every action would be answerable to shareholders, whereas a private company would allow him to be able to do what he thinks needs to be done to transform his company and make it more agile. At this point, PC sales account for 70% of the company's revenues and more than half of its profits, but Dell believes that if the company is going to survive it needs to move from dependence on things like laptops and desktop. He sees that to survive and grow in the future the company needs to become more of a "business services" company concentrating on managing servers, software in the cloud, and data center equipment.
However, this move to a private company isn't going to be cheap and apparently the deal that is being led by private equity group Silver Lakes Management and Michael Dell could cost as much as $22 billion, which would make this the largest leveraged takeovers since 2007. To accomplish the purchase Silver Lakes has lined up four banks to provide an estimated $15 billion. According to Bloomberg, these banks include: Credit Suisse Group, Royal Bank of Canada, Barclays, and Bank of America; with a share price of between $13.50 and $14 being offered.
One analyst, Bernstein Research's Tony Sacconaghi believes the deal is workable because Dell would be able to switch the money it pays in dividends to meet the interest of the loan needed to take Dell private.