Donald Yacktman Buys Dell and IBM
Dell’s stock has leapt 33 percent year to date, as talk circulated and was later confirmed that the company would be taken private while it transforms from a PC maker to services provider. The deal was announced on Tuesday and is valued at $24 billion. It would also leave Dell with $15 billion in additional debt.
According to the announcement, the company’s founder and CEO, Michel Dell, in partnership with private equity firm Silver Lake, are acquiring the company for $13.65 per share in cash. The price represented a 37 percent premium over the average closing price for the previous 90 days.
Yacktman also bought a fractional amount of a recent Warren Buffett buy, IBM. Yacktman paid $195 each for 2,800 shares of the company, whose price is near a 10-year high at $199 per share on Thursday.
IBM has been growing revenue at a 5.5 percent rate over the past five years, EBITDA at 11.3 percent, free cash flow at 13.4 percent and book value at 2.6 percent.
In 2011, it produced almost $107 billion in revenue, and $15.9 billion in earnings.
Warren Buffett in his annual letter praised IBM CEOs Lou Gerstner and Sam Palmisano for rescuing the company from the brink of bankruptcy 20 years ago and making it into a successful business today. “Their financial management was equally brilliant,” to their “extraordinary” operational accomplishments, Buffett said, “particularly in recent years as the company’s financial flexibility improved. Indeed, I can think of no major company that has had better financial management, a skill that has materially increased the gains enjoyed by IBM shareholders.”
He was also impressed that the company consistently met its five-year business goals, and believe it will do the same for its 2015 road map.
Currently IBM has a P/E ratio of 9.1, P/B ratio of 2.3 and P/S ratio of 0.4.
Donald Yacktman has 63 stocks in the Yacktman Asset Management Co. portfolio, which is valued at $16.68. See more of his fourth quarter updates in the portfolio here. Also check out the undervalued stocks, top growth companies and high yield stocks of Donald Yacktman.