JF3, here's some financial analysis of why this merger would not work well IMO:
IBM has a current market cap of approximately $212.2BB while Dell has a market cap of $105.4 BB. In order to induce Dell shareholders to sell, I believe that IBM would need to offer an exchange of 0.26 shares of IBM for each share of DELL minimally. IBM's current price is $234 and Dell's is 41 1/2. But the actual premium is not as big as might be expected -- more on that later.
Thus, there would be a total of about 1.567 BB shares o/s after the merger (907 + .26*2,540= 1,567), and neglecting any change in the total capitalized price of the merger ($105.4BB + 212.2BB = $317.6BB), we would have an IBM share price of around $202.63/share ($317.6/1.567), and the implied price per share of Dell would rise to about 52.68 (202.63 * .26 = $52.69)-- only about a 27% premium over market and less than the current annual high. Furthermore, at this ratio IBM shareholders will hold a little less than 58% of the shares.
Will people like Dell, Topfer and Meredith trade in their potentially lucrative options positions in a rapidly growing company like Dell for a much slower growing IBM? I don't know, but if IBM were to offer much more of a premium to Dell shareholders I could see a shareholder revolt developing.
On the other hand the merger does offer some potential synergies that go well beyond the use of Dell's efficient PC assembly operation. For example, the practical application of "virtual integration" to IBM's entire product lineup must have IBM management drooling. I can see many more opportunities in the combination, but again I come to the key issue of price.
TTFN,
CTC |
