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Temasek not interested in backing Silver Lake Dell take-private

18 Jan 2013

singapore-night_sqSingapore sovereign wealth fund Temasek is reportedly not interested in joining the Silver Lake-led consortium pursuing a take-private buyout of US technology giant Dell.

Previous reports suggested Silver Lake was sounding out limited partners in its funds including Temasek and Canadian Pension Plan Investment Board (CPP), the $170bn retirement system, to help back a potential deal, although a source told Reuters that Temasek was not interested.

CPP also backed Silver Lake’s buyout of Skype, while Temasek was a joint investor in Alibaba in 2011 when Silver Lake first invested in the Chinese ecommerce giant.

But a second source with knowledge of the state investor’s strategy told Reuters a business like Dell does not fit into its four investment themes, comprising Transforming Economies, Growing Middle Income Populations, Deepening Comparative Advantages and Emerging Champions.

“If you look at the themes, whether it is the growing middle income class or transforming economies, Dell is not an obvious thing for (Temasek) to look at,” the source told Reuters.

Reports earlier this week confirmed Silver Lake is close to lining up about $15bn in financing for the deal, which would rank as the largest leveraged buyout since the financial crisis.

Bloomberg said yesterday that banks including Credit Suisse, Royal Bank of Canada, Barclays and Bank of America could informally disclose terms to a small group of possible buyers of the bridge loan as soon as Thursday.

The banks were understood to be informally sounding out debt investors to gauge whether they could package up and sell pieces of the debt in a syndication process once the deal is finalised, the report said, adding that a deal could be announced as soon as next week.

JPMorgan, Dell’s advisor, would also provide staple financing to the buyout group. The rest of the funds would come from Silver Lake and its limited partners, Dell itself or founder and CEO Michael Dell, who owns about 15 per cent of the company’s shares. Dell’s stock market value reached $22.3bn yesterday, making a potential deal the largest since a Blackstone-led consortium bought semiconductor company Freescale in 2006 for $17.5bn.

Dell had a market value of about $19bn before shares soared 13 per cent on Monday following news of the deal talks, which were first reported on Monday evening by Bloomberg.

Dell has struggled in recent years amid competition from tablet makers such as Apple.

A take-private could give the company more room to overhaul its corporate structure and focus on data centre equipment as opposed to personal computers.

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