Bernstein Doubts Michael Dell Will Take Dell Private Again

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With investors asking whether Dell Technologies’ (NYSE:DELL) CEO Michael Dell will take the company private once again, Bernstein analyst Toni Sacconaghi said he doubts it will happen.

In a note to clients, the analyst estimated that Michael Dell and Silver Lake, who own a significant stake in the company, would likely need $17 billion to $22 billion to buy out all other shareholders, assuming a 10-40% premium.

“Incremental debt on Dell’s balance sheet might be in the ~$10-15B range given Michal Dell could use his cash proceeds from the sale of VMWare shares. Under such a take-private scenario, Dell could pay off all the incremental debt on its balance sheet in just 2-3 years,” said Sacconaghi. “Alternatively, Dell could choose to effectively gradually take itself private, by using its FCF to purchase outstanding shares not held by Michael Dell or Silver Lake.”

An alternative method could be a combination of both – repurchasing shares aggressively over the next 1 to 2 years, and then looking to take Dell private, the analyst stated.

“At that point, taking Dell private could potentially be funded with debt financing alone,” he added.

“The real question – of course – is whether Michael Dell would ultimately want to go private again, at any price. We suspect not – ‘Been there, done that before’ plus it’s a lot of work. Moreover, we note that aggressively repurchasing shares is also tricky – Dell has limited float today, its super majority voting structure limits inclusion in the S&P500, and repurchasing too many shares could further undermine liquidity and interest in the name.”