Palm to sell stake for $325 mln
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Mon, 04 Jun 2007 13:18:01 GMT |
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By Franklin PaulNEW YORK (Reuters) - Treo smartphone maker Palm Inc. said on Monday it will sell a 25 percent stake to private equity firm Elevation Partners for $325 million, in a deal that adds a former Apple Inc. executive to its board.Shares of Palm Inc. jumped more than 14 percent to $18.40 before the bell on Monday. The rise recoups most of the value they lost after a speculated deal to sell the company failed to materialize in late March. At the time, phone makers Nokia and Motorola Inc. were seen as possible suitors.Palm also plans to pay $9 per share in cash to stockholders, and use the new proceeds along with existing cash and $400 million of new debt to finance the cash payout."As a result of this transaction, we will strengthen the Palm leadership team and create a more effective capital structure," said Ed Colligan, Palm chief executive said in a statement.Palm said that once the Elevation deal is completed, it will increase the size of its board to nine from eight, adding Jon Rubinstein, formerly head of the iPod division at Apple Inc. He will serve as executive chairman.Palm, which once dominated the market for pocket-sized digital organizers, or PDAs, after it launched its original Palm Pilot in 1996, has long been tossed around as an acquisition target, thanks to its well-known brand, operating system and its relationship with mobile phone carriers.But PDA demand has dwindled, and while its popular Treo smartphone shipped some 2.3 million units in its last fiscal year, Palm's phone sales are dwarfed by rivals Nokia, Motorola, Samsung Electronics <005930.KS> and Sony Ericsson <6758.T>.Elevation's founders are Roger McNamee and Marc Bodnick, founding members of tech-focused private equity firm Silver Lake; Bret Pearlman, a Blackstone Group veteran; Fred Anderson, the former chief financial officer of Apple Computer; and rock star Bono, the lead singer of U2.The Menlo Park, California-based firm, which raised a $1.9 billion private equity fund in 2005 that focuses on media and entertainment investments, said this is its largest investment to date.Private equity firms typically take controlling stakes in companies, restructure the businesses, and sell them later. The Palm deal is another example of Elevation taking a minority stake in a company, as it did with its roughly $200 million deal with Forbes. Buyout firms usually hold onto their investments for three to five years.(Additional reporting by Michael Flaherty)
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