What investors have to take away from the Hewlett-Packard news is one simpleton notion that is not quite so simple in reality. That $13.65 per share proposed buyout price of Dell Inc. (NASDAQ: DELL) sounds like a bottom fishing expedition by founding CEO Michael Dell.
We previously put out a maximum buyout value per share at $15.00 after the buyout rumors resurfaced this time around. If you will recall, there had been prior stories in prior years that Michael Dell was considering a buyout. Then the latest explanation showed that dozens of meetings and discussions had taken place. One investor’s argument is that Dell is worth $24 per share.
Another consideration has to be made here. It is very possible that Michael Dell will not raise his management led buyout by one penny. We threw out a billionaire mindset scenario whereby we speculated that maybe Michael Dell doesn’t really want to acquire the company. His angle may solely be to establish a floor in the price of the stock.
Hewlett-Packard shares were up around $17.90 when we covered the earnings report. At last look we have shares up 7% at $18.30 and that is the highest price going back to September of 2012. H-P is too big in any rational case to acquire on its own due to a $33 billion market cap. It is not too large to try to unlock value here and there.
Michael Dell is paying about 8-times trailing earnings. Hewlett-Packard is currently trading at under 5-times earnings. So what if Michael Dell cannot win a buyout of his PC-maker empire? He might try many ways to unlock shareholder value. We still question whether or not Mr. Dell will really raise his offer for the company higher than the $13.65 per share price that the board agreed to. Shareholders may say also vote against the deal.
Dell shares are up at $13.85 after closing at $13.82 today and the closing bell price is only 1.25% higher than the proposed buyout price.
Is a higher buyout price coming? Maybe.
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