Firstly, I had to laugh when I saw the Reuters story and the accidentally published Soros obituary. Imagine the look on his face when he saw that story. Secondly, I wasn't exactly laughing when I saw this story this morning.
In a letter to Dell’s board, Blackstone cited an “unprecedented” 14 percent market decline in PC volume in the first quarter, according to a statement today. The world’s biggest buyout firm made a non-binding offer to acquire Dell last month, rivaling a $24.4 billion joint bid by founder Michael Dell and Silver Lake Management LLC, the largest proposed leveraged buyout since the financial crisis.
“Dell is facing downward price pressure on PCs, shrinking margins, and lower cash flow, and that’s the last thing you want in a leveraged buyout,” said Alberto Moel, a technology analyst at Sanford C. Bernstein & Co. in Hong Kong. “You take a company private because you think you can do better; that you have some unidentified growth opportunity, or else ways to cut costs and improve margins. Dell has neither.”
Here's my question. Why on earth is anyone actually thinking of an LBO on this thing? I might be missing something, or maybe Michael Dell is just freaking out because his namesake is being threatened by an entire industry shift that they have missed out on. I can say pretty confidently that I am not an expert on Dell nor have I done any 'in the weeds' analysis of their business but from a high up lookover it doesn't look pretty at all.
What am I missing here? Is Dell doomed or is there some hidden value that firms think they can unlock by going private?
Because they thought they could get it cheap. And they still might.
Not commenting on the Dell situation (because I haven't been following it too closely) but there was so much unintended hilarity with the Soros obituary it kept me busy for an hour. Seriously, what the fuck was with the Roman numerals?
The placeholders...?
Dell + SilverLake tabled a $24.4 Billion offer correct?
Dell currently has ~$3.4B cash net of debt. So the question would be, are Dell's operations worth $21 Billion dollars? Operating Cash flow in FY 2012 was ~$3B. Not bad for a dying firm.
Maybe BX is trying to beat the stock into submission to swoop in at the 11th hour?
Ya, I have the same thought as you. I saw the BCG, JPM, GS pitch books from Dell sec filings, and it seems they think there is an opportunity to target SMB. But then again they are pitch books from sell side, suppose to bullshit til it looks feasible.
Blackstone's retreat makes the deal chance better than it was before. I don't know why Blackstone even got involved in the first place, maybe because of David Johnson (ex M&A Dell Director). Blackstone got all their overhead costs covered, courtesy of Dell, who paid them $25 MM.
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