Business
Perot and his father, company founder H. Ross Perot Sr., initially declined Dells suggestion that the companies merge, Perot Jr. said in an interview. Dell, the worlds second-largest maker of personal computers, and Perot Systems, a provider of computer services, seemed too different, he said.
“I went down to Austin to meet him on Saturday for breakfast a couple of years ago, thinking we were going to do some business together, and Michael broached it,” said Perot Jr., chairman of the Plano, Texas-based company. “We really liked each other, but I said no. Dell is in the manufacturing business, were in services. Theyre as different as football and basketball.”
Perot Jr. said talks with Michael Dell, a family friend since the 1980s, “just evolved” over time. Dell, 44, convinced the Perot family that the acquisition would benefit both Texas technology companies by expanding sales. Negotiations heated up in June, culminating this week in Dells $30-a-share cash offer.
The acquisition vaults Dell into the health-care information-technology business, giving the company access to customers such as hospitals and insurance companies. Health-care IT spending, including outlays for services and equipment, will total $22.3 billion this year, the research firm IDC estimates.
Complementary Pieces
“What we see in Perot Systems is an incredibly complementary set of capabilities,” Michael Dell, who serves as chairman and chief executive officer, told employees in a question-and-answer session this week. The combination will “allow us to go pursue all kinds of new customer opportunities in new geographies.”
Dell, based in Round Rock, Texas, fell 28 cents to $15.73 yesterday in Nasdaq Stock Market trading. The shares have climbed 54 percent this year. Perot Systems jumped 65 percent to $29.56 on Sept. 21, the day the deal was announced. The shares were unchanged yesterday.
The Perot family stands to make almost $400 million from the deal. About 25 percent of Perot Systems belongs to HWGA Ltd., which is the familys investment company. Perot Sr., 79, is HWGAs managing partner.
Family Riches
The two blocks of stock together are valued at $952 million at the $30-a-share acquisition price, which is 68 percent more than the familys $568 million stake on Sept. 18, before the deal was announced. Perot Sr. has an estimated worth of about $5 billion and his son, 52, has a fortune of about $2.2 billion, according to Forbes magazine.
With Perot Systems, founded by the elder Perot in 1988, Dell can expand its services business and challenge International Business Machines Corp. and Hewlett-Packard Co. The combined company stands to benefit from a U.S. economic stimulus package that will pour about $20 billion into health- care information technology. Perot Systems, whose customers include the Centers for Disease Control and Prevention, gets about half of its sales from hospitals, physicians practices and health-insurance companies.
“To have our company join with Michael Dells company will make one more than twice as productive as on their own,” Perot Sr., a former U.S. presidential candidate, said in a separate interview. “Together, we have a lot more freedom and flexibility to do great work.
Great Admiration
“I have watched Michael Dell with great admiration as Dell has grown, and am absolutely comfortable as far as culture is concerned, or I wouldnt have done it,” Perot Sr. said.
Perot Systems hired Goldman Sachs Group Inc. about a month ago to “give opinions and make sure best practices were observed,” Perot Jr. said. Morgan Stanley advised Dell.
Thomas Luce III, a Dell director since 1991 and a member of the audit committee, also “played a critical role in the deal,” Perot Jr. said. Luce has been a close associate, friend and adviser to the elder Perot for much of his business career.
“We never really asked for stock” during the course of negotiations with Dell, Perot Jr. said. “With the way stocks are beaten down, cash is a better way for them to go.”
Once the acquisition is complete, Perot Systems will become Dells services unit, headed by Perots current CEO, Peter Altabef. Dells services business will generate annual sales of about $8 billion and the deal will probably boost profit in fiscal 2012, Dell said this week.