Dan Primack, Fortune senior editor, weighs in on a potential buyout of the tech giant, and why he believes Dell’s numbers are just too big to get a deal done. Richard LeFrak, The LeFrak Organization president, and Wilbur Ross, WL Ross & Co. chairman & CEO, also discuss.
After 10.1% Return In 2020, Mohnish Pabrai Changes Strategy [2020 Letter]
Mohnish Pabrai's flagship hedge fund, the Pabrai Investment Fund II, returned 29.6% in the second half of 2020. Following this performance, the fund returned 10.1% net for the year, underperforming the S&P 500 but outperforming the Dow Jones Industrial Average, which returned just 9.7%. According to a copy of the investment manager's year-end letter to Read More
want to put on that. you have about $11 billion that you said in cash, but you’ve got to bring some of that and repatriate it back. you don’t know if there’s going to be a tax holiday. plus $5 billion in debt, almost $5 billion in debt on the books so you kind of have to cut that out, so it’s kind of $6 billion in net cash. what would be the equity check? and what would be the amount of money they have to raise in terms of financing from the bank? i think you’re probably talking total equity between six and eight. some would be michael dell’s, he’d roll over 3. so maybe between 4 billion and 5 billion dollars in equity or cash the private equity firms would have to raise, get from their coinvestors, et cetera. we have wilbur ross here on the set. i should ask wilbur since this is your business. 20 plus billion dollar buyout transaction, does this make sense to you? well, i think the quantity of cash is there. whether the numbers work, i think, is the other question. but, for example, the european — the fact they’ve got a lot of cash offshore, you could just as well do euro/dollar bond issue or something of that suit. i don’t think that’s the big hurdle. the big hurdle is would the lbo leverage sponsors and equity sponsors buy into the theory that it was really going to turn around quickly. remember this is a company whose earnings have been in kind of free-fall. dan, what kind of check did you say the banks would have to write in terms of financing? the banks would probably have to write a check of around $15 billion. and as wilbur says, the cash is there. this is a very good credit environment. but that is a huge amount of financing for an lbo. in fact we haven’t seen something like that since the financial crisis, and you’re not buying into a great road story here. you’re not buying into energy. you’re buying into dell. basically the banks would be asked to do a bet on the personal computer market. dan, the second piece of this, as i think about it, though, is this idea that you’re actually going back to the club deal, right? you’re having two firms club up, and now with something that was, almost, i thought it was now a relic of the 2007, ’06, ’05 and people were no longer going to do that, at best, they were going to partner potentially with their own limited partners like the pension funds but not necessarily together to fund themselves. yeah, and it’s particularly interesting that tpg is involved in this. one of the biggest private equity firms in the world but they might have some troubles fund-raising next time out. their performance hasn’t been good the last two funds. one of the things they’ve been telling their own investors getting ready for a fund raise later this year is we haven’t been doing club deals. out of their current fund they haven’t done a single club deal. i know they’re talked about with best buy. but this would be, you know, not violating that because they didn’t make a pledge but that’s kind of been a good talking point for them that they’d lose in part of this. becky had mentioned i think it was pisani who was talking about whether you could break up dell into two different companies. he was quoting tony — and whether you break up the company and then they take one piece of it private and leave one out public. it’s a possibility. you know, it’s a possibilit it’s not usually what the private equity firms do with something like this and the big question would be where does michael dell go now? which piece does he get? which piece does he run? so, if we’re all waking up this morning, trying to make sense of this, you’re cautioning people that this is not happening? if you’re handicapping this is that a 50/50 not happening or 90-10 not happening? i think it’s kind of an 80/20 not happening. i mean in the end getting done. you know, actually getting finance, getting closed, actually happening. really happening. you want to wager? i think it’s 50/50. lefrak you have views on this? you mean the dell guys coming back? maybe we could pay them stock, i don’t know. i didn’t think about that. if that’s part of this deal, 80/20 it happens if the dell guy comes back. okay we’re going to leave it there, dan. thank you for helping us sort through some of this. we’ll see where this goes and i’m sure we’ll talk to you again about it if it does move forward. 50/50. thanks, dan. fed chairman ben bernanke