Wilbur Ross, chairman and CEO of WL Ross and Co., estimates Dell’s chances of going private at “50-50.”
The personal computer company has reportedly been in talks for two to three months with private equity firms TPG and Silver Lake Partners for a deal that would likely total more than $20 billion, The Wall Street Journal reports.
Dell’s stock jumped 13 percent Monday on the news, and gained another 1.8 percent early Tuesday. That put the company’s market capitalization at $21.8 billion.
Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.
Money isn’t an obstacle, Ross tells CNBC. “The quantity of cash is there. Whether the numbers work is another question.”
The company’s $11 billion cash hoard might reassure borrowers and investors in a deal.
"The real hurdle would be [if] the [leveraged buyout’s] leverage sponsors and equity sponsors buy into the theory that it was really going to turn around quickly," Ross says. "Remember [Dell] is a company whose earnings have been in a kind of free fall."
Dell has struggled to distance itself from only being a PC maker, as that market shrinks.
Rich Kugele, an analyst at Needham & Co. says a privatization could work well for Dell.
“They could generate a tremendous amount of cash for many years to come, or they could be more dramatic and invest heavily in a mobile strategy, and not be scrutinized by public investors every quarter while they did it,” he tells Bloomberg.
Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.
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