Dell in buyout talks with private-equity firms

PUBLISHED : Tuesday, 15 January, 2013, 12:09pm
UPDATED : Wednesday, 16 January, 2013, 4:18am

Dell, the personal-computer maker that lost almost a third of its value last year, was in buyout talks with private-equity firms, two people with knowledge of the matter said.

The company was discussing going private with TPG Capital and Silver Lake, said one of the people, who asked not to be identified. A deal could be announced as soon as this week, another person said.

The discussions could fall apart because firms might not be able to line up the needed financing or resolve how to exit the investment in the future, the people said.

Several large banks had been contacted about financing an offer, one of the people said. The computer maker had a market value of US$18.9 billion as of January 11.

Taking the company private could help Dell accelerate efforts to revive growth and cope with competition without quarter-by-quarter scrutiny from public shareholders.

Chief executive Michael Dell has been using acquisitions to sell more products to businesses as consumers shun PCs in favour of tablets and smartphones.

"The stock has not done much, and he's under pressure to boost numbers," said Abhey Lamba, an analyst at Mizuho Securities USA. "He wants to de-emphasise about two-thirds of his business, and that's a hard strategy to push because it would mean revenue will shrink."

Shares in Dell jumped 13 per cent after the talks were reported.

Michael Dell led the firm to the top of the industry by cobbling together PCs from off-the-shelf parts and delivering them directly to consumers at a lower cost than rivals. It lost the top spot to Hewlett-Packard in 2006 and more recently has struggled to contend with new competitors.

The chief executive owned 15.7 per cent of the company, making it easier for firms to put together equity financing for the deal, one of the people said.