The PC maker Dell is considering potential buyouts from private equity firms, reports Bloomberg. According to the news agency, at least two people familiar with the matter have told it that Dell is in talks with TPG Capital and Silver Lake private equity firms, but these discussions are still preliminary and could fall apart.
The report further adds that several large banks have been approached for the financing, as Dell’s market cap is around $18.9 billion (as of Jan 11, 2013) and would need large financing if going-private plans have to go through.
A similar report from Reuters, which also cites two of its sources, confirmed what Bloomberg is reporting.
This isn’t the first time that Dell has considered going private. CEO and founder Michael Dell confirmed at an investor meet in June 2010 that he had considered taking the company private.
Some analysts believe that taken Dell private might help the company in its shift from PC business to enterprise hardware, software and services by escaping the investor scrutiny. “You can be bolder in your decisions when you are a private company,” one analyst noted. While others are skeptical about the size of Dell and its going private is no easy task because of the massive financing requirements.
“The market value of Dell has come down so much that a buyout has become something that is plausible. They have about $5 billion in net cash and also free cash flow generation that could sustain payments on debt from a leveraged buyout,” told S&P Capital IQ analyst Angelo Zino to Reuters. “However, we think it’s unlikely, given the sheer size of Dell and where the stock is currently trading at.”
Dell has declined to comment on the talks.
Dell, which was founded by Michael Dell in University dorm room in 1984, has been ceding market share to HP and Lenovo to the past few years. Even the latest preliminary report from Gartner suggests that Dell lost 2 pc of market share in the Q4, 2012, slipping to 10.2 pc from 12.2 pc in 2011.
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