Silver Lake brings bank-sources to advance Dell Inc. (NASDAQ:DELL)’s buyout talks - BAC
Northern, WI 1/17/2013 (avauncer) - Shares of Dell Inc. (NASDAQ:DELL), soared 7% with the news that talks for its buyout have progressed. Silver Lake Partners, the firm behind the deal is collaborating with its major investor Limited Partners and has approached Bank of America Corp(NYSE:BAC) and three other banks to leverage the deal.
If finalized the buyout could be worth $19 billion making it the biggest buyout since the last global recession. Equity investment of the buyer will be as much as $2 billion.
The privatization bears a twofold advantage for Dell Inc. (NASDAQ:DELL) developed as a one-stop tech company amid a shrinking PC market and an opportunity to move away from public scrutiny. JP Morgan, the adviser behind the deal declined comment. The report was first announced in the Wall Street Journal
Michael Dell CEO of the third largest PC maker owns 14% of its equity i.e. almost 244 million shares of the company.
Loosing as much as 40% of its market value Dell Inc. (NASDAQ:DELL) has been contemplating the deal for some time now. The buyout is not much of a shock but many industry participants are wary of the investment logic which could attract a potential investor from the private-equity side.
According to a private equity executive experienced in buyouts the acquisitions as a private company can easily escape Wall Street investigations. Moreover private equity investors can access debt markets a lot easier. The gigantic cut-down in valuation could be the reason for the potential deal, some analysts contend.
Toni Sacconaghia Sanford Berstein analyst estimates the company’s shares are worth $12. The PC unit contributes $4.70 to this. Price being negotiated ranges between $13.5 to $14, sources confirmed.
A declining PC market amid makes this big a deal challenging especially with the introduction of the Apple Inc. (NASDAQ:AAPL) iPad tablets. Sacconaghi notes a low prospect for a buyout that big due to “low valuation and the interest rates” when there is signs of effort for “restructuring” or “an exit strategy”.
Ben Reitzes, Barclasys analyst said privatization will boost debts beyond $9 billion and that kind of deal can only be justified “if Dell had a stable earning power and constant recurring revenues”.
The shares of Dell Inc. (NASDAQ:DELL) declined by 4.25% t$12.61.
The shares of Bank of America Corp(NYSE:BAC) were up 1.99% to $11.78.