Dell delisting, and share valuation concerns
MOHAN R. LAVI
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As with Dell, questions on the offer price have arisen in the case of Cadbury in India.
The story of Dell represents the story of American enterprise. Started in a college dormitory room, and making products that the technology age devoured with passion, the company wasted no time in catapulting itself to a market capitalisation of more than $100 billion.
For some time, it was also the darling of the stock market. In stark contrast, last week, Dell unveiled a buyout deal to take the company private. The $24.4-billion buyout would be financed with Michael Dell’s cash and equity, cash from Silver Lake, and a $2 billion credit line from Microsoft.
Four major investment banks — Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets — are financing the debt. The primary intention behind the go-private move appears to be to escape the harsh glare of the markets with iffy quarterly results and to focus on strategy without being hounded by analysts.
It could well be a combination of many factors, but the fact that cannot be denied is that Dell has been bleeding because of the shift in the market to smartphones and tablets and its inability to play catch-up. Further bleeding could have only hammered its stock price. While the buyout can help it avoid quarterly analysis and questions, delisting could also prevent Dell from building a war-chest for future acquisitions.
LEVERAGED BUYOUTS
As in most leveraged buyouts, the price being offered — $13.50-13.75 a share — is being questioned. Southeastern Asset Management — which has some stake in Dell — hopes to make life difficult for Michael Dell. As the largest outside shareholder of the eponymous company, it says it doesn’t support the cheaply priced buyout led by the billionaire founder and will vote against