Dell Buyout Doesn’t Herald Return of Mega-LBOs, Schwarzman Says

Dell Inc. (DELL)’s move toward a leveraged buyout doesn’t signal the return of multi-billion dollar private equity deals, Blackstone Group LP (BX) Chief Executive Officer Stephen Schwarzman said.

“This isn’t your run-of-the-mill situation,” Schwarzman, 65, said in an interview with Bloomberg Television’s Erik Schatzker at the World Economic Forum in Davos, Switzerland today. “This is a pretty unique set of circumstances with a fundamentally unleveraged company with an owner and founder that can put up a lot of the equity to make the deal happen.”

Dell, the third-biggest maker of personal computers, is getting closer to clinching a leveraged buyout with Silver Lake Management LLC and Microsoft Corp. (MSFT) is planning to provide part of the funding, people with knowledge of the matter said yesterday. Michael Dell, the top shareholder in the computer company that has a market value of $22.8 billion, would roll his stake into the buyout, a person with knowledge of the matter said Jan. 21.

Blackstone didn’t look at buying Dell because the PC business “is a tough road,” Schwarzman said.

“The financial elements of the deal are very clever,” he said. “The issue is going to be how the business actually performs.”

The firm invested about $4 billion out of its $16 billion leveraged-buyout fund last year, Schwarzman said.

Buyout firms such as New York-based Blackstone typically use loans secured on the targets they acquire to finance more than half of the purchase price and cash from their own funds for the rest. The firms seek to improve performance at the companies they acquire or expand them before selling them within five years.

“The private equity business has a reasonable level of activity,” Schwarzman said. “The deals aren’t as big but there are plenty of interesting opportunities.”

To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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