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Dell Looks to Sell Perot Systems for More Than $5 Billion to Raise Cash for EMC Deal

Dell is trying to sell off the services business it bought six years ago from onetime presidential candidate Ross Perot.

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Dell is looking to sell Perot Systems, a key piece of its technology outsourcing business, for more than $5 billion, sources tell Re/code.

The hardware technology giant, led by CEO Michael Dell and private equity firm Silver Lake Partners, is altogether trying to raise $10 billion by selling non-core assets to help reduce the level of debt it will incur when it completes its acquisition of EMC. The asking price is ambitious, according to sources.

Dell, which acquired Perot in 2009 for $3.9 billion, has already approached several international IT consultancy companies as potential buyers, according to sources. The company has talked to Tata Consultancy Services, an India-based technology consulting and services firm; Atos, a French IT outsourcing firm; Genpact, an IT services firm based in New York that was formerly part of GE; and CGI, a Canadian IT firm.

Talks with TCS reached an advanced stage last week, but ended after the parties couldn’t agree on a price, these people say. TCS, which generates $14 billion in annual sales, is a subsidiary of India’s Tata Group, the 147-year-old industrial conglomerate based in Mumbai.

Perot Systems, an IT services company founded by the billionaire and onetime U.S. presidential candidate Ross Perot, handles a lot of technology needs for government agencies and health care providers, including helping to process medical claims.

Spokespeople for Dell and Silver Lake declined to comment, as did spokespeople for the potential buyers, TCS, Genpact, CGI and Atos.

Dell first started shopping the business about three months ago, before it announced its plan to acquire EMC, according to sources. Several companies were sounded out as potential buyers, including diversified IT and computing companies like IBM and Hewlett Packard Enterprise as well as India-based Infosys, all of which passed.

The sale could be a key component of Dell’s deal to buy EMC. Selling Perot would help raise cash Dell needs to pay down debt after it closes on its proposed acquisition of the storage company EMC. Dell and its co-owner, the private equity firm Silver Lake, offered a combination of cash and tracking shares to buy out EMC in a deal valued at $67 billion when it was announced on Oct. 12. But there are still significant issues with the deal, given the complexity of the proposed deal structure. In addition to taking on a combined $50 billion in debt, Dell and Silver Lake have proposed to issue tracking shares linked to VMware, a software subsidiary of EMC, to help finance the EMC purchase. A 60-day go-shop period during which EMC sought offers superior to Dell’s expired early Saturday morning.

Dell executives started hinting at the potential for asset sales almost immediately after the deal was announced. The company was reported last month to be looking to raise as much as $10 billion through the sale of non-core assets in order to help pay down some of the $50 billion or so it has proposed to borrow to pay for EMC. Sources confirmed to Re/code that other assets being considered for sale include Quest Software and SonicWall, companies it acquired in 2012.

Some of the companies approached by Dell have done large acquisitions recently. Last year, Atos spent $1.05 billion to buy Xerox’s IT outsourcing business. In 2012, Montreal-based CGI spent $2.6 billion to acquire the British IT services firm Logica. The deal made CGI Canada’s largest tech firm by revenue ahead of Blackberry.

Correction: We updated the story to reflect that CGI is now Canada’s largest tech firm by revenue, not its second-largest.

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