Dell plans IPO to enhance its bought out SecureWorks' valuation
Dell is planning for an initial public offer (IPO) for its recently bought SecureWorks, which will be spun off soon, to enhance its market capitalization significantly. Dell may raise funds up to $154.9 million from the proposed IPO.
Dell bought SecureWorks for $612 million in 2011. After IPO, SecureWorks' valuation is expected to be $1.4 billion. According to the documents, SecureWorks would sell in the range of $15.50 and $17.50 a share.
Yahoo Finance reports that Dell is exploring ways on raising funds from $134.3 million to $154.9 million from the initial public offer. However, Dell may not transfer the proceeds to its affiliates. This makes it impossible for Dell to use some of the proceeds to pay its huge $67 billion acquisition of EMC. Dell CEO Michael Dell almost owns SecureWorks entirely.
SecureWorks recorded $339.5 million revenues in 2015 from $262.1 million in 2014. The gross margins were $155.7 million while the net loss was at $72.3 million. SecureWorks provides cyber security software enabling companies to monitor their IT infrastructure from hackers and malware.
Fortune further adds that SecureWorks in its filing said its annual growth is in the range of 30 percent and 27 percent. Subscription revenues were $271.8 million in 2016 fiscal up from $170.2 million in 2014 fiscal. The net loss eased from $44.5 million in 2014 fiscal to $38.5 million in 2015 fiscal.
Michael Dell led the organization as privately-held company. Dell is expected to spin off SecureWorks after IPO. Dell and EMC announced the $67 billion EMC acquisition plan in October 2016. However, since then, Dell has been exploring several options to fund the acquisition.
Dell is also planning to acquire other technology companiessuch as Sonic Wall Security business and Quest Software for a reported $2 billion each. Dell, in February, received an approval from Federal Trade Commission for the $67 billion acquisition of EMC. If it gets through, it'll be the largest pure-tech merger in the history.
Dell is planning to float 20 percent of SecureWorks' stock on Nasdaq, as Re/code reveals, but the technology major has not announced the IPO date or how much money will be mobilized via public offer. The proposed ticker symbol is 'SCWX.' SecureWorks has clarified that there wouldn't be any funds transfer to support Dell's $67-billion acquisition of data storage equipment company EMC. Dell is planning to raise over $50 billion in debt.
Recently, Dell was looking to sell its IT services and consulting unit Perot Systems. In 2009, Dell acquired Perot Systems for $3.9 billion with an objective of taking on Hewlett-Packard and IBM. EMC and VMware have also taken up cost cutting exercise. If any unexpected developments don't take, then Dell's EMC acquisition is expected to be completed in October 2016.