File this in the "I don't get it Big Dan" category. KKR is investing $700 million into the computer maker for what Sun says are "strategic opportunities for growth." If a company announces plans to raise cash worth 2.8% of its entire market capitalization, you'd think they would disclose more, but apparently not in this case. I don't understand why Sun needs more cash or the imprimateur of a top-tier private equity firm that this investment brings.
For KKR, the deal makes sense. The five and seven-year convertible notes the firm is purchasing furnishes it with priority over stockholders if Sun gets in big trouble. And if the company can rebound, KKR can convert its debt to equity at $7.21 per share and warrants at a higher price. With such low coupon payments, the deal is basically a volatility play. KKR loses if things stay the same subpar to mediocre way they have been going at Sun into the next decade.
Despite Silver Lake Partners' position as the best known technology buyout shop, KKR has been busy in the past. Its holdings include Aricent, which produces software for the communications industry, semiconductor makers Avago Technologies and NXP Semiconductors, and software and data storage provider SunGard Data Systems. It also invested in ATM maker Wincor Nixdorf.
For more on Sun and KKR, see:
The Deal
Barron's
Tags: sun, vc, kkr, venture+capital
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