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Microsoft May Help Take Dell Private
It could kick in somewhere between $1 billion and $3 billion
By: Maureen O'Gara
Jan. 23, 2013 08:15 AM
Microsoft is in talks to help Dell finance a buyout, according to both CNBC and the Wall Street Journal.
It could kick in somewhere between $1 billion and $3 billion.
The rumored price to take Dell private remains around $13-$14 a share.
Private equity house Silver Lake Partners has reportedly been talking to banks as well as pension and sovereign wealth funds to arrange an estimated $15 billion in financing.
Microsoft, which has more than $66.6 billion in the bank, has recently started making its own tablets, but the only PC company it ever threw a lifeline to before was Apple.
The move may irritate other PC vendors. Obviously Microsoft may feel that it needs Dell to sell its software although Dell's PC revenue is declining.
CNBC, which broke the news, said Microsoft might invest in mezzanine financing that takes the form of preferred securities that convert into equity down the road.
According to CNBC's David Faber, "It doesn't mean that Microsoft will end up with a significant equity stake in what is a private Dell but it certainly has a lot at stake to make sure that the company does well because of course it sells an awful lot of software into those computers."
Faber thinks there could be an announcement by the end of the week if they can agree on a price.
The Journal said Microsoft may be able to use offshore money without triggering repatriation taxes if its investment in Dell is less than 25%. Any gains would have to be kept overseas. Microsoft has $58 billion overseas and has been looking for investments with better yields than US government bonds.
Microsoft bought Skype from Silver Lake for $8.5 billion in 2011 and committed $695 million to Barnes and Noble's Android-based Nook business last year including a deal to make an e-reader with Windows software.
Then there's its multibillion-dollar partnership with Nokia, which is using Windows for its struggling smartphones and its $240 million investment in Facebook, which is using some of Microsoft's search.
Microsoft teamed with Silver Lake in a failed attempt to acquire Yahoo.
A Dell buyout, as practically everyone has previously remarked, would be the biggest leveraged buyout since 2008 when credit collapsed.
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