As we predicted a year ago, Tinman Michael Dell is working out a way to take his tin box shifting outfit private.
Rumours of the move raised the price of Dell’s shares by 13 percent as shareholders want Dell to make them an offer they can’t refuse.
According to Reuters, Dell is in talks with private equity firms on a potential buyout. Michael Dell owns about 14 percent of the company.
TPG and Silver Lake have been named as being involved, possibly in conjunction with other investors such as JPMorgan Chase.
It is starting to look like any potential deal could be structured as a management-led buyout with Michael Dell at the helm.
Negotiations have been going on for three months and it is expected that something could be announced in six weeks.
Dell has lost 40 percent of its value since last year’s peak, and is trying to reinvent itself as a seller of higher-margin services to corporations.
It would prefer that any restructuring is done without having flatfooted shareholders moaning about it.
People, including us, have been suggesting that taking Dell private makes sense even if the company has debts of $4.5 billion. The share price has fallen so low that there is really little advantage for the company to look to shareholders.
The company also has $5 billion in net cash and also free cash flow generation that could sustain payments on debt from a leveraged buyout.
If the buyout takes place it would be one of the largest deals since the global recession.