Silver Lake hunts for investors in Dell deal - sources

NEW YORK/SINGAPORE Fri Jan 18, 2013 8:01am IST

A Dell computer logo is seen on a laptop at Best Buy in Phoenix, Arizona, February 18, 2010. REUTERS/Joshua Lott/Files

A Dell computer logo is seen on a laptop at Best Buy in Phoenix, Arizona, February 18, 2010.

Credit: Reuters/Joshua Lott/Files

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NEW YORK/SINGAPORE (Reuters) - Silver Lake Partners, trying to finalize a bidding group to take Dell Inc DELL.O private, is in talks with the manager of Canada's pension plan and other potential investment partners, people familiar with the matter said.

Dell also has formed a special committee to take a close look at any potential deal on the table, multiple sources with knowledge of the matter told Reuters.

Silver Lake, in its quest to put together what would be the largest buyout since the global financial crisis, has reached out to the $170 billion Canada Pension Plan Investment Board and other investors in its fund, known as limited partners, the people said.

Thus far, Singapore's state investor Temasek Holdings Pte Ltd -- another prospective equity partner that Silver Lake has tapped -- is not interested in joining the consortium, the people said.

While Silver Lake has yet to line up investment partners, the buyout firm has told its bank lenders that it remains very confident about its ability to secure equity financing, two of the sources said.

Founder and CEO Mike Dell remains a linchpin of the effort. The man who grew Dell from a college dorm-room hobby into the world's No. 3 PC maker is sitting on an estimated personal fortune of $14.6 billion, according to Forbes.

It is unclear how much the billionaire will contribute to the buyout, or how much of his 14 percent stake in Dell will be rolled into the deal, the sources said.

One of the two sources said Silver Lake did not need to line up firm commitments from equity partners like CPPIB ahead of time, because those could be secured after a deal structure is devised and put in place.

"It is not pinned down as to what might be rolled and what might be new. The other equity partners don't have to show up with a signed commitment letter," the source said on condition of anonymity because the discussions are not public.

"It is not around the equity. There is a very fluid situation now."

A Temasek spokesman declined to comment on market speculation. A spokesman for the CPPIB declined to comment. Silver Lake could not be immediately reached for comment. Dell declined to comment.

Silver Lake is a known quantity to Dell or its top executives. Michael Dell was an early investor in their funds while board member Alex Mandl has also worked with the firm in the past.

Dell's software chief, John Swainson, who joined last March, was a senior advisor at Silver Lake.

SETTING SUN

One of the sources aware of Temasek's strategy said a company like Dell does not fit into its investment themes, which include "emerging champions" and "growing middle-income populations."

"It's not happening," another source told Reuters on Thursday, responding to media reports that Temasek is one of the prospective investment partners talking to Silver Lake about joining the consortium.

Wall Street analysts without direct knowledge of the deal discussions have cast doubt on the wisdom of investing in a stagnant PC industry rapidly getting eclipsed by a growing preference for mobile connected devices, like tablets.

In the PC market itself, Dell has steadily ceded market share to nimbler rivals such as Lenovo Group (0992.HK) and is struggling to re-ignite growth. That's in spite of Michael Dell's best efforts in the five years since he retook the helm of the company he founded in 1984, following a brief hiatus during which its fortunes waned rapidly.

Silver Lake is having markedly more success on other aspects of the deal. It has tapped Credit Suisse (CSGN.VX), Bank of America Merrill Lynch (BAC.N), Barclays (BARC.L) and RBC (RY.TO) to finance a potential deal, sources have previously told Reuters.

A potential buyout of Dell -- a $19 billion company -- would allow Dell, which has been trying to become a one-stop shop for corporate technology needs as the PC market shrinks, to conduct that difficult makeover away from public scrutiny.

Dell, which has been in talks with private equity firms on a potential buyout, has had on-and-off discussions with the firms but talks heated up late last year, sources have said. (Reporting by Saeed Azhar in Singapore; Additional reporting by Nicola Leske in New York; Editing by Paritosh Bansal, Gerald E. McCormick, Nick Zieminski and Stephen Coates)

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