News: Falling stock prices contribute to difficulties.
Dell’s acquisition of EMC looks to be in trouble after difficulties were reported in raising the funds for the deal.
According to reports, the banking consortium which is led by JP Morgan has asked for a 10-day extension to price the first $10bn chunk of the debt needed to finance the deal.
This is because tighter credit markets are making the loans harder to sell, reports the New York Post, attributing the claim to an anonymous source.
The deal is also being significantly impacted by the steep downturn in technology stocks. One of the ways Dell had been hoping to finance the deal is by selling Perot Systems for around $5bn, however, the front runner Atos last week dropped out of the auction.
Atos cited stock price worries for the reason to drop out of the deal but NTT Data and Tata are still in the bidding to take over Perot Systems.
The drop in the stock market has been a significant creator of problems for the acquisition. This is because shareholders had originally been due to get $24.05 per share in cash and tracking stock that is tied to the value of VMware, which is 80% owned by EMC.
However, that was when stock in the company was worth $69 per share, it is now sitting at $43. Attempts have been made to boost the VMware stock by distancing from a proposed joint cloud project between itself and EMC called Virtustream.
If Dell is unable to complete the deal then it will be hit by a large bill to pay. The terms of the deal state that Dell has to pay EMC $4bn in compensation if the buyout falls through.
A Dell spokesman told The Post: "The EMC transaction is on schedule under the original timetable and the original terms."