Dell shares soared to an eight-month high following Bloomberg reports about the company planning for a possible buyout with private equity firms. As per the reports, Dell stock surged nearly 13 percent closing at $12.29 in New York.
Discussions on the deal with the CEO and founder, Michel Dell, are on, according to Reuters. TPG and Silver Lake are in the potential investors' list, JPMorgan Chase & Co's name is also in the running, The Wall Street Journal reported.
With the world's third-ranked PC-makers hit with a $9 billion debt, the buyout could be worth more than $20 billion, according to The New York Times. The newspaper further reported that it would be the biggest technology buyout since the Blackstone Group acquisition of Freescale Semiconductor for $17.6 billion in 2006.
Bloomberg reports suggest that going private will prove beneficial for Dell with no quarter-by-quarter scrutiny from public shareholders to speed up efforts to restore growth and handle the competition.
"The stock has not done much, and he's under pressure to boost numbers," Abhey Lamba, an analyst at Mizuho Securities USA Inc, said according to Bloomberg. "He wants to de-emphasize about two-thirds of his business, and that's a hard strategy to push because it would mean overall revenue will shrink."
However, The Times analyzed that buyers would have to come up with more than $6 billion in equity, a huge amount for even two private equity firms to cover, assuming that these shops rope in other investors to help out with the equity check. The newspaper also said that the buyers may need to raise around $16 billion in debt financing.
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