Dell Buyout Rumors Resurface

Here is what investors need to know. Michael Dell has been the rumored buyer before, so if it was a private equity deal it would almost certainly include him. Michael Dell owns some 243 million shares or so, and the second largest shareholders is Southern Asset Management with some 130 million shares coming to almost 7.5% of the shares outstanding.

On a standalone basis, Dell’s mean price target by analysts is only %11.96 and the 12% pop we have seen has shares up at $12.23. The market cap is $19 billion as of now. Dell has over $15 billion of short-term and long-term liquidity before getting into any receivables, inventory, and other current assets.

We would caution that this is very much of a new rumor after an old rumor. To get a deal of this size done, it would require a huge consortium of private equity groups. Dell also has $5.3 billion in long-term debt and it lists another amount of close to $4.2 billion in “other” liabilities and almost $4 billion in deferred long-term liability charges.

This would not be an easy deal to get done in raw financial terms die to the large size. Another issue is that even after the pop the $12.20 share price compares to a 52-week range of $8.69 to $18.36.

Anything is possible, but we would advise the public that this rumor has been out there before. One thing is worth noting. If Dell somehow manages to snag a private equity buyout at 7-times earnings or so, imagine how many other deals could be rumored as follow-on deals from past tech giants that trade at 10-times earnings and less.