Filed under: Technology, Mergers & Acquisitions, Rumors, Industry News
The proposed management-led buyout of Dell Inc. (NASDAQ: DELL) is far from being without controversy. When the deal was still in the rumor stage, we came up with a maximum valuation of $15.00 per share (down to $13.60) for what a buyer would pay and what the shareholders might agree to. With the buyout price currently set at $13.65, it is no shock to us that the top institutional shareholders are effectively fighting the price.
24/7 Wall St. has a different take than what the media reports have been covering. We are not really convinced that Michael Dell really wants to acquire Dell in a management-led buyout. Sure, he wants it. We just think there is a backup plan in the works that is not being reported in the mainstream media.
The size of the deal alone is massive, and repatriating the overseas capital to help pay for the deal will come at a steep price. Our take is that investors need to consider this effort as “The Dell Put!” being the worst case scenario. The best case scenario would be a higher buyout price. Either way, Michael Dell‘s effort here may have ambitions other than what the headline flow and media coverage might have you believe.
So, if Michael Dell is not really interested in taking the company private, the end result is that Mr. Dell is really trying to establish a floor price in the stock. Will that floor be $13.65? Not likely. Maybe Michael Dell thinks that the downside of the deal falling apart is that the stock will not really trade under $12.50 or $13.00 in the future.
To get to this thought, all you have to do is step into the mind of a billionaire whose fortune is largely tied to the share price of a company. That is not just any company, but the share price of a PC-maker. Now that Apple Inc. (NASDAQ: AAPL) has been waging war on Windows-based PCs and winning, and now that Hewlett-Packard Co. (NYSE: HPQ) is in a multiyear disarray, this has to be scary for Mr. Dell. Getting Microsoft Corp. (NASDAQ: MSFT) makes for yet another interesting angle. If this deal falls apart, maybe Michael Dell would still consider including Microsoft as a financial partner ahead. Think about how you would like to be the king of yesteryear’s technology trend that has been passed by.
Our opinion is that the Dell LBO may end up being a very intelligent share price hedging maneuver by Michael Dell. If he does not get to acquire the company outright, he can at least say in a press release, “This deal was deemed today as not being an attractive price for Dell’s shareholders. These shareholders can have the comfort that I have a standing offer at or close to the proposed $13.65 share price, and I am willing to resubmit this offer in the future when the mix of shareholders owns …read more
Source: FULL ARTICLE at DailyFinance