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Even though financing for Dell’s (NASDAQ:DELL) leveraged buyout is nearing completion, shareholder displeasure has slowed the deal’s momentum slightly. Ten days ago many of Dell’s shareholders were angry over Silver Lake’s proposed offer of $13 to $14 per share for the company, but with the private equity firm increasing its bid to $15 per share, the deal may have come closer to being finalized.
Shares of the computer company jumped a little more than 3 percent temporarily on Tuesday after the Financial Times reported the higher offer.
But whether the new $15-dollar-per-share proposal will satisfy shareholders is still unknown. According to Barron’s, the deal could be met with shareholder opposition and potentially lawsuits if the price is too low. The earlier bid was already deemed unsatisfactory. A $14-per-share leveraged buyout would “amount to insiders trying to steal the company,” a shareholder told the publication last week.
When taking into account Dell’s expected earnings of $1.70 per share for the current fiscal year, which ends later this month, and $1.65 cents per share for the next fiscal year, the offer does appear a bit low. Silver Lake’s offer would value the company at just 8.4 times projected forward earnings, without taking into account Dell’s $5 billion of net cash. A leveraged buyout is usually priced at 15 times after-tax earnings…
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