Dell Inc. (DELL), the personal-computer maker that lost almost a third of its value last year, is in buyout talks with private-equity firms, two people with knowledge of the matter said.
Round Rock, Texas-based Dell is discussing going private with at least two firms, said one of the people, who declined to be identified because the talks are private. The discussions are preliminary and could fall apart because the firms may not be able to line up the needed financing or resolve how to exit the investment in the future, the people said.
Several large banks have been contacted about financing an offer, one of the people said.
Chief Executive Officer Michael Dell has been using acquisitions to help the company he founded sell more computers and services to businesses. Dell is struggling to regain share in the PC market as consumers switch to tablets, including Apple Inc.’s (AAPL) iPad, and smartphones such as the handsets that use Google Inc.’s Android software.
CEO Dell owns 15.7 percent of the company, making it easier for firms to put together equity financing for the deal, one of the people said.
Goldman Sachs Group Inc. (GS) upgraded the stock to buy in December, saying that Dell’s net cash balance presents an opportunity for a leveraged buyout.
While demand for PCs has declined, Dell’s net cash balance of $5.15 billion provides “some downside buffer as it produces opportunity for an LBO or levered recap under the right conditions,” Bill Shope, an analyst at Goldman Sachs, wrote in the report. “Dell has become an attractive deep value play and we would be buyers of the stock.”
Michael Dell, who retook the CEO position in 2007, said in 2010 he had considered taking the company private.
By Serena Saitto & Jeffrey McCracken
Courtesy of Bloomberg News