Dell's shares have jumped by 13 per cent following reports that the world's third-largest PC vendor is in buyout talks with two private equity firms.
According to multiple reports last night, Dell is holding serious discussions with private equity firms TPG Capital and Silver Lake as it considers hiding itself away from the prying eyes of the stock market.
Bloomberg, which first broke the news, cited a source saying a deal could be announced as soon as this week, but cautioned that any agreement could yet fall apart over how it is financed.
Dell's market valuation crashed by 30 per cent last year, standing at $18.9bn before news of the talks sparked a 13 per cent rally in its share price.
Although Dell has reportedly been chatting to private equity houses for years, the firm's relatively low valuation means talks have "heated up" in recent months, The Wall Street Journal said. It said a deal could emerge within six weeks, citing two unnamed sources.
Michael Dell, who founded the company from his dorm room in 1984, owns 15.7 per cent of the firm, which may make it easier to finance the deal. One source said the deal could be structured as an MBO, with the billionaire Texan (pictured) at the helm.
Dell lost its crown as the world's largest PC vendor to HP in 2006 and has spent the last five years diversifying into enterprise hardware, software through acquisition. In 2007, the former direct-selling purist finally embraced the channel and now draws over half of its EMEA revenues from partners.
However, half of its revenues still come from a PC market that is in freefall, and Dell may be keen to engineer further change without the constraints that come with being stock market listed.
Abhey Lamba, an analyst at Mizuho Securities USA Inc, told 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."
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