Dell Inc is in talks with private equity firms on a potential buyout, two sources familiar with the matter said, confirming reports that sent shares in the world’s No. 3 PC maker soaring 13 percent to nearly an eight-month high.
The firms are now holding discussions on a deal with billionaire CEO and founder Michael Dell, who owns about 14 percent of the company, according to one source with knowledge of the matter.
The Wall Street Journal cited unidentified sources as saying TPG and Silver Lake could team up on an offer, possibly in conjunction with other investors such as pension funds. JPMorgan Chase & Co was also involved in the negotiations, it added.
The first source said any potential deal could be structured as a management-led buyout with Michael Dell at the helm. He now owns 244 million shares in the company, according to Thomson Reuters data, and last year was ranked the 22nd richest American with a fortune of US$14.6 billion.
Talks had progressed for two to three months, heating up in late last year, and a deal could be reached in six weeks, the Journal cited sources as saying.
Dell, which has steadily ceded market share to Hewlett Packard Co and China’s Lenovo Group (聯想), declined to comment on what it called rumors and speculation.
The company 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 — an internal overhaul that might be conducted away from public scrutiny.
Some analysts say taking the company private, an idea that has surfaced sporadically in past years, makes sense.
However, others pointed to the sheer expense of such a deal, an outsized debt burden of about US$4.5 billion and murky prospects as a major player in a PC market that is dwindling with the advent of tablet computers.
Before news of the deal emerged, Sanford Bernstein analyst Toni Sacconaghi speculated that Dell was worth US$12 a share on a sum-of-parts basis, of which the PC business was worth about US$4.70. In a report last week, the analyst said Dell could conceivably be split along its PC and enterprises segments, though such an approach would significantly reduce much-needed scale.
Shipments of computers by the company, now reinventing itself as a provider of computers and services to corporations and government agencies, plummeted 21 percent in the fourth quarter, according to IDC. In the third quarter, its profit slid 47 percent.
On Monday, another industry research firm, Gartner, estimated that Dell lost 2 percentage points of market share in the fourth quarter, slipping to 10.2 percent from 12.2 percent a year earlier.
Dell’s stock soared to an intraday high of US$12.83 in afternoon trade — the highest since May last year — after a brief trading suspension. It closed at US$12.29.