Eagle Eye Opener: Michael Dell’s $24 Billion Offer to Buy Back Company Accepted; McGraw Hill, S&P 500 Sued for Allegedly Understating Risk of Mortgage-Backed Securities; Barclays Spends $12 Billion for Payment Protection Insurance
Michael Dell’s Sweetened Offer Lets Him Buy Back Computer Firm (AP)
In an update from last week’s report, Michael Dell, founder of Dell, Inc., has won approval to re-purchase publicly traded DELL corporation and return it to private ownership. At this time last week, the deal Dell and his group had offered was just under $9.8 billion — with more than half of it coming from Dell himself — but more than doubling his offer helped to win the deal this morning for $24.4 billion. Roughly $13 billion of the purchase price is expected to come from techno-industry investor Silver Lake and former competitor Microsoft Corp. (MSFT). Upon completion, the deal would remove one of the high-tech industry’s largest players from the grasp of public investors and mark the biggest buyout deal since the Great Recession dried up financing. The deal will let Dell’s management try to turnaround the company away from the financial pressures of Wall Street. Dell stockholders will be paid $13.65 per share.
McGraw Hill, S&P 500 Accused of Downplaying Risk of Mortgage-Backed Securities (Bloomberg)
The U.S. Department of Justice (DOJ) sued McGraw-Hill Cos. (MHP) and the S&P 500 credit rating agency yesterday for allegedly underestimating the risk associated with the mortgage-backed securities portions of their loan portfolios. The period of time in which this underestimating was to have taken place was September 2004 through October 2007 — resulting in more business for that portion of the bank. It is still uncertain whether the charges will stick or not, meaning the ultimate effect of the alleged actions on the company’s share price is unclear.
Barclays: Is $12 Billion Too Much for a Reputation? (Reuters)
Barclays Chairman David Walker is finding it harder and harder to retrace the steps that the company took in 2008. Back then at the height of the global financial crisis, his company virtually was going door-to-door for funding. At that time, the banking behemoth took pride in not having to resort to taking loans from the government to stay open. However, to date, the company already has spent more than $12 billion in payment protection insurance — the cost of fighting allegations of improper funding. So in the long run, taking government funds may have been the more cost-effective course of action. Ultimately, the company’s 2013 share price will reflect the market’s view.