With just one bidder, you would think that the price Michael Dell and his private-equity friends will offer later this week for Dell (DELL) might be pretty low.
Bloomberg reports today that Dell is close to making his bid, offering his personal fortune, his stake in the company, and the company's own cash to take more than half the equity in the company, with Microsoft (MSFT) and Silver Lake Partners offering the other half.
The Bloomberg figures show a price of $8-9 billion in cash, plus the corporate coffers, and that claim may be deliberate spin on Dell's part, given that the company is currently profitable and is selling on the open market for nearly $23 billion. Evercore Partners (EVR), which has supposedly been seeking other bidders, insists no such bidders have emerged, but why should such bidders essentially bid against themselves?
Let Dell make his offer and then let other bidders come in with their own offers.
At $23 billion Dell would be selling for a little over half its annual revenue. Intel (INTC), by contrast, sells at more than two times its annual sales, and a premium to sales is fairly normal, although it must be said that HP's (HPQ) current market cap is barely more than one-fourth its annual revenues.
Dell's way to going private might be clearer given that equity investor Donald Yacktman has reportedly bought into the company at prices averaging $9.77/share. Even a $13.50 price would thus leave him with a fat 35% profit on a half year's of "work." Having new buyers happy to sell also makes the deal go down.
Still, it seems obvious that whatever price Dell offers has to scare off potential competitors. If a company like Oracle (ORCL) sees him getting away with the assets cheap, his company's current market cap of $167 billion assures it has the resources to try to take it away, dividing up the assets among willing buyers and making a fortune.
So my guess is $14.50/share. That would bring the price to about $25 billion, a big enough profit to make the punters happy and a high enough price to scare away the vultures from the prize.
Which means that if you want to jump in now you can still make a little money. Sell on the bid and walk away.
Disclosure: I am long MSFT.