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Dell to Acquire Perot Systems for $3.9 Billion

Dell to acquire Perot Systems for $3.9 billion; companies together represent $8 billion in services revenue in deal that is likely to have an impact on insurance IT marketplace.

In a deal likely to have real implications for the insurance technology services marketplace Dell (Round Rock, Texas) and Perot Systems (Plano, Texas) have entered a definitive agreement for Dell to acquire Perot Systems in a transaction valued at approximately $3.9 billion. Terms of the agreement were approved yesterday by the boards of directors of both companies.

According to a press release, "The acquisition will result in a compelling combination of two iconic information-technology brands." Among the benefits the "expanded Dell" expects to gain are the following, the statement details:

  • Provide a broader range of IT services and solutions and optimize how they're delivered;
  • Extend the reach of Perot Systems' capabilities, including in the most dynamic customer segments, around the world: and,

    Supply leading Dell computer systems to even more Perot Systems customers.

"Dell and Perot Systems share several key characteristics and our products, services and structures are overwhelmingly complementary," the press release states, including "similarly strong, relationship-based business cultures."

Over the past four quarters Dell and Perot Systems had a combined $16 billion in enterprise-hardware and IT-services revenue, with about $8 billion from enhanced services and support.

The deal is likely to have an impact on the insurance technology market, according to Matthew Josefowicz, Director, Insurance, Novarica. "Dell finally admits it doesn't understand consulting or outsourcing and buys a major services/BPO provider to get away from the commodity hardware business," Josefowicz said in a published assessment of the deal. "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. Dell immediately becomes a player in the insurance market, competing with HP and IBM."

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. The transaction is not subject to a financing condition. The transaction, which is subject to customary government approvals and the satisfaction of other customary conditions, 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 CEO. 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.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio

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