Updated
We’re a little perplexed by this.
Sun chief executive Jonathan Schwartz (pictured left) says the cash infusion from KKR will be used to pursue growth, but then says we “certainly don’t need the money.” Was he misquoted or are we missing something?
From the WSJ:
The Santa Clara, Calif., company also announced that private-equity firm Kohlberg Kravis Roberts & Co. will make a $700 million investment in the company in the form of convertible senior notes. Along with the investment, KKR will nominate a member of Sun’s board of directors.
Sun Chief Executive Jonathan Schwartz said the investment would give a boost to the company’s turnaround and help it reach new financial customers. “It’s an opportunistic transaction,” with the cash to be used to pursue growth initiatives, he said. “We certainly don’t need the money.”
Sun has nearly $3.5 billion in cash and short term investments on its book, so presumably he doesn’t need it.
Here’s the company’s entire announcement about it.
This is the second confusing statement of his we’ve cited recently. The other was the non-answer about why Sun bought land in Second Life.
[Update: Paul Kedrosky says the move is also to defend Sun from hostile takeover bids at lower prices than what KKR paid]
6 Comments
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Eugene Cook said:
I don’t understand what you find so confusing about his answer. Can there be no distinction made between transactions born out of “opportunity” rather then necessity.
This is the whole idea of leveraging debt for different endeavors, and is quite common practice.
Am I missing something?
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Matt Marshall said:
Right, so he *does* need it.
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Larry Dignan said:
Here are a few reasons for the KKR deal: he wants to float the idea Sun could go private; they may want to acquire something; just to send a message. More here: http://blogs.zdnet.com/BTL/?p=4345
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Eugene Cook said:
@MATT
No, he DOESN’T need it is the point.
There is a different from want and need, the distinction being that there is a voluntary nature to its acceptance. Need insinuates that he has no choice.
You could argue that to fulfill his desires for the firm he needs the money, but at its core his actions are still voluntary.
And sometimes people bring on equity owners not for the capital investment they might bring, but rather more for their network or influence.
It may be a semantic argument, but I just don’t see it.
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Cameron Bahar said:
Well it paves the way for KKR to take Sun private. Private equity is flush with cash and they need to spend it. Sun is a potential candidate. Buy low, sell higher.
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Sramana Mitra said:
May be, Jonathan just wants to get to know George Roberts, and pave way for a PE job later :-)
