Elevation Partners, a $1.9bn private equity firm that counts Bono among its five principals, announced it’s taking an approximately 25% stake in Palm, maker of the Treo smartphone range and the new Foleo mobile companion.
“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,” said Ed Colligan, Palm president and CEO, just before breaking into a special rendition of ‘Where the Streets Have No Name’, in which he sang mournfully of ‘Where the Streets Have No Wi-Fi’ (OK I made this but up). Under the terms of the recapitalization plan, Elevation will purchase $325m of a new series of convertible preferred stock. The deal will of course be dilutive to shareholders so Palm is doling out a $9 per share cash distribution to existing shareholders.
Elevation has secured commitments for $400m of new debt and a $40m revolving credit facility to help pay for the cash distribution and ongoing investments at Palm. The company expects to have more than $300m of cash on the balance sheet after the distribution.
When the deal closes several of the Elevation team will take top jobs on the Palm board, though Bono won’t be directly involved.
Elevation’s Fred Anderson and Roger McNamee, managing directors and co-founders, will join Palm’s board on closing of the transaction. Additionally, Jon Rubinstein, former senior vice president of hardware engineering and head of the iPod division at Apple, will join Palm as executive chairman.
Rubinstein, Anderson, and McNamee will replace Eric Benhamou and D. Scott Mercer, who will resign from Palm’s board of directors at that time. The total number of directors on the board will be increased from eight to nine in connection with the transaction.
Elevation Partners invests in media, entertainment, and consumer-related businesses. Its five partners are Fred Anderson, former EVP and CFO of Apple; Bret Pearlman, former senior managing director of The Blackstone Group; Marc Bodnick, a founding principal of Silver Lake Partners; Roger McNamee, co-founder of Silver Lake Partners and Integral Capital Partners; and Bono, the lead singer, co-founder and international sunglasses evangelist from U2.
Further details of the news here.