Dell shares surge on report it's in talks to go private

Mon Jan 14, 2013 6:40pm EST
 

By Nadia Damouni and Poornima Gupta

NEW YORK/SAN FRANCISCO (Reuters) - Dell Inc is in talks with private equity firms on a potential buyout, two sources familiar with the matter told Reuters, confirming a Bloomberg report that sent its shares soaring 13 percent to near an eight-month high.

The world's No. 3 PC maker is in talks with at least two private equity firms about going private and the discussions are preliminary as the financing has not yet been secured, said Bloomberg, citing two people with knowledge of the matter.

Dell, which has steadily ceded market share to Hewlett Packard and China's Lenovo, declined to comment on what it called rumors and speculation.

Some analysts say taking the company private - an idea that has surfaced sporadically in past years - makes sense.

It has lost 40 percent of its value since last year's peak, and it is trying to reinvent itself as a seller of higher-margin services to corporations - an internal overhaul that might be conducted away from public scrutiny.

Others pointed to the sheer expense of such a deal, an outsized debt burden of some $4.5 billion and murky prospects as a major player in a PC market that's dwindling with the advent of tablets such as Apple Inc's iPad.

"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," said S&P Capital IQ analyst Angelo Zino.

"However, we think it's unlikely, given the sheer size of Dell and where the stock is currently trading at."   Continued...

 
A man wipes the logo of the Dell IT firm at the CeBIT exhibition centre in Hannover February 28, 2010. REUTERS/Thomas Peter