Palm's financial future looked a little more secure this week as private-equity firm Elevation Partners said it will pump US$325 million into the mobile device manufacturer. Elevation is a $1.9 billion private-equity firm and one of its five partners is Bono, the lead singer of Irish rock band U2
In recent months, rumours have swirled that Palm would be acquired by either Motorola or Nokia, as the company faces aggressive competition in the smartphone market.
The recapitalisation plan will see Elevation take a 25 percent equity stake in Palm, valuing the company at $8.50 per share, a premium of around 16 percent compared with the stock's performance over the last 10 trading days. The investment in Palm is by far the largest Elevation Partners has ever made.
The device maker has also secured $400 million and a $40 million revolving credit facility. Palm will use the proceeds from the sale of its stock and the proceeds from the new debt to fund a $9 per share cash distribution to its shareholders, excluding Elevation. The total amount of money shareholders will receive will be around $940 million. Palm expects the move will leave it with more than $300 million of cash on its balance sheet.
Subject to shareholder approval and other closing conditions, Palm expects to complete the recapitalisation in the third quarter of this calendar year.
Along with its handheld devices and Treo smartphones, Palm last week debuted a handheld computer called Foleo, which it calls a smartphone companion device.