TPG drove a hard bargain. Knew Intel needs cash, nobody else is interested and used the opportunity to get most from its investment with minimal investment. Otherwise, it doesn't any make sense for Intel to relinquish control but keep 49% stake. Billions squandered, first when they bought it and now again when they are selling it.
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There is a lot of enthusiasm and excitement on the McAfee team. Many now feel like they are free to succeed.
Anyone surviving at MFE should feel lucky that they company is escaping certain death. I wish you well MFE some of you are quite talented and I hope you can make what is felt into something.
Intel has been better at financial engineering than at engineering products off late.
How is it that debt is adding value to the worth of the company. Shouldn't it reduce the value? Crazy !!!
@xqy - It looks like Intel only finances the debt until the deal is closed (3-5 months) after which one would assume they go out and raise the $2B outside. Is that a reasonable assumption?
From the public press release, this is how I understand it.
The total company is worth $4.2B, half of it will be funded by debt the other half funded by equity.
Intel gets $3.1B but then turns around and provides financing of $2B for the new company's debt, leaving Intel to get about $1.1B back in its coffers, and relinquishing 51% control of the company.
TPG contributes ~1.1B and gets 51% control of the company.
In the context of the original purchase price, Intel lost billions. Is this a good deal now, maybe, since sunk costs are generally not relevant to the current the decision.
With the limited deal data online, this seems to be structured as follows:
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Intel gets $3.1B in cash up front
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The JV is valued (for now and for deal accounting purposes) at $4.2B - this figures the approx $2.2B in yearly revenue plus another $2B in debt they will issue.
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Intel owns 49% of the JV, or (for now), $2.058B
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TPG will slim down the company (layoffs would be almost certain) and spin it back out for much higher gain. Intel will benefit, but it is not yet clear how that final exit will be structured.
So, it's not a bad deal - Intel never understood the business (they still had a separate sales force after six years) and figured to get better value by having someone else do the prep work. Currently, Intel's valuation is $3.1+$2.1=$5.2B, but after TPG polishes it up, they should all make their money back (a la Symantec). And, while margins were never published, the business added about $2B a year to top-level revenue, so there was previously some ongoing benefit.
IMHO, this was the smart move of the BK era. And probably a final dig at RJ.
More layoffs to come..
4.2 billion values McAfee at 8.2 billion, 3.1 billion (cash to Intel) values the company at 6.1 billion. Which is it... did Intel make money (8.2B), or lose money (6.1B)?
Symantec is worth $15 billion FGS. Would McAfee not worth even half that ? Intel people signing this off should be sacked immediately. They are working against the company.