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Dell to offload Perot Systems for $5bn: report

Every little helps in reducing gigantic EMC deal mountain

Michael Dell, photo: Dell
Michael Dell: My credit rating appears to be better than yours

For sale, Perot Systems, just two careful owners - a bargain at $5bn. All reasonable offers accepted. Dell nearly sold its IT services business Perot Systems to Tata Consultancy Services but talks collapsed over the price.

The company quietly put Perot on the block for more than $5bn three months ago and has hawked the firm to tech services providers including Atos, Genpact and CGI. The company bought Perot Systems for $3.9bn in 2009.

Hats off to Re/code’s Arik Hesseldahl, who got the scoop. Dell’s motivation in selling Perot is easy enough to discern - $5bn will go a goodly way to reducing the $40bn debt mountain it will incur if and when its $67bn acquisition completes.

EMC’s 60-day ‘Go shop’ clause expired on December 12, which means that no credible counter-offers have surfaced. That’s one less hurdle to jump. But the Internal Revenue Service (IRS) remains the elephant in the room.

Some analysts think the U.S. tax authority would impose a deal-breaking $9bn tax bill if Dell issues tracking stock linked to VMWare, an EMC subsidiary with a market cap of $25bn.

This is a key component in the funding package assembled by Dell and its private equity backer Silver Lake Partners and, unsurprisingly, Dell thinks it will not trigger a taxable event under US tax law.

We will find out soon enough who is wrong. ®

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