Dell Inc. (NASDAQ:DELL) shareholders affirmed a deal that will see the company go private under the control of founder Michael Dell yesterday. A new report from Baird takes a look at how the market should value shares in the company as it heads toward the consummation of that deal.
The report says that the market is likely to value each share at $14, which includes the $13.75 the deal valued the shares at, as well as the $0.13 dividend that the deal will pay to each shareholder. There is an 8 cent dividend due on each share that Baird analyst Jayson Noland adds onto the value of the shares to round out the total.
Dell in the future
Dell Inc. (NASDAQ:DELL) will not be the same company in a few years, according to the analysis. The company is likely to move into higher margin business in the coming years, shifting to a focus on profitability rather than market share. The new focus is a good one according to Noland.
When Dell Inc. (NASDAQ:DELL) is privatized, gross margin will be a key metric for the company. The consumer PC market is weak, so mass production for the mass market isn’t going to work at Dell. Revenue is declining, because of the weakness in the market. Dell Inc. (NASDAQ:DELL) is going to have to change its focus.
The market is unlikely to hear very much from Dell Inc. (NASDAQ:DELL) going forward, because it will stop trading on the public exchange. That means demand for news about the company will disappear, and its products are likely to be a smaller and smaller part of the PC market in future years.
The Dell Inc. (NASDAQ:DELL) privatization deal was a hard fought battle between the Michael Dell-led consortium and investors led by hedge fund manager Carl Icahn. Icahn was not necessarily against the deal, but he wanted more money per share from the buyout.
Icahn got a considerable bump in the price paid in the end, and he stopped trying to get in the way of the deal earlier this week. Dell Inc. (NASDAQ:DELL) shares have risen by more than 36 percent since the start of 2013. That’s a decent return for any investor who bought into the company in the hopes of an acquisition bump.