Dell Finalizes $3.9 Billion Acquisition of Perot Systems

Dell (Round Rock, Texas) has finalized its plans to acquire Perot Systems, announcing that it has entered into a definitive agreement to acquire the Plano, Texas-based technology services provider for $3.9 billion. The terms of the agreement were approved yesterday by the boards of directors of both companies, according to a Perot Systems press release.

Under the terms of the agreement, Dell will commence a tender offer to acquire all of the outstanding Class A common stock of Perot Systems for $30 per share in cash, according to the Perot Systems source.' The transaction is expected to close in Dell's November-January fiscal quarter.

Once the acquisition is complete, Perot Systems will become Dell's services unit and be led from Plano by Peter Altabef, the current Perot Systems chief executive officer. 'At the same time, Dell directors are expected to consider Ross Perot Jr., Perot Systems' chairman of the board, for appointment to the Dell board.'

The appointment of Perot Systems' Altabef shows that Dell is looking to Perot to access its customers for Dell's traditional business, asserts Craig Weber, senior vice president of Celent's (Boston) insurance practice. The access will go both ways, and potentially benefit both companies, Weber suggests. "This deal makes a lot of sense because Dell has a relationship with virtually every insurer but hasn't conquered the service world, and Perot has," Weber says. "Dell is buying its way into the service world, and Perot is getting access to a huge carrier market. If Dell can sell into Perot's existing client base, that's potentially huge."

The deal can be seen as an admission by Dell that it doesn't understand consulting or outsourcing, as it buys a major service/BPO provider to get away from the commodity hardware business, according to Matthew Josefowiz, director of Novarica's (New York) insurance practice. "It will be interesting to see what impact this has on Perot's large BPO/VICO (virtualized insurance company operations) business for life insurers, and what Dell will do with this," Josefowicz speculates. "Dell immediately becomes a player in the insurance market, competing with HP and IBM."

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio