Palm Shareholders Approve Elevation Investment | eWeek

Palm Shareholders Approve Elevation Investment

Written By
Roy Mark
Roy Mark
Sep 13, 2007
2 minute read
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Completing a recapitalization deal announced in June, Palm shareholders, Sept. 12, approved a $325 million investment in the handheld maker by Elevation Partners, handing the private equity firm a 25 percent stake in Palm.

The deal also calls for Palm to borrow up to $400 million in an associated debt financing and make a cash distribution of $9 per share to Palm stockholders.

In connection with the transaction, Apples former iPod division chief Jon Rubinstein will join Palm as executive chairman of the board. In addition, Gordon Campbell and Donna Dubinsky will join the Palm board as Class II directors.

“As a result of this transaction, we will strengthen the Palm leadership team and create a more effective capital structure, which puts us in a great position to attract new talent, significantly strengthen our execution capabilities and deliver long-term shareholder value,” Palm CEO Ed Colligan said in a June 4 statement when the deal was first announced.

Makers of the popular Treo line of smartphones, Palm has struggled recently, including a 43 percent drop in fourth quarter profits. Palm also took a $10 million charge Sept. 5 with the cancellation of Foleo, a small portable computer the company never released.

“This is by far the largest investment that Elevation has ever made, which reflects our enthusiasm for Palm and its opportunity,” Rofer McNamee, an Elevation co-founder and managing partner, said in the June 4 announcement. “We see Palm as uniquely positioned to deliver the integrated software and hardware solutions that will drive the next generation of mobile computing.”

Click here to read about how Palm was hurt by the iPhone price cut.

The $940 million distribution to shareholders represents more than half of Palms current market capitalization and allows existing equity holders to retain nearly three-quarters of the post-transaction equity. The company expects to have more than $300 million of cash on the balance sheet after the distribution.

“This is a company with an impressive history of introducing game-changing products —it pioneered the smartphone—and I intend to help extend that legacy,” Rubinstein said on June 4.

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