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Palm to Sell 25% Stake, Add Former iPod Head to Board

Palm announced that it will sell a 25% stake in the company to private equity firm Elevation Partners for $325 million. Shares of Palm jumped to $18.40, a rise that recovered most of the value the company lost after buyout rumors in March failed to produce a buyer.

Palm says it plans to use the investment, as well as existing cash and new debt to pay $9 per share in cash to stockholders.

As part of the deal, Palm also will increase size of its board from eight to nine, adding Jon Rubinstein, formerly head of Apple’s  iPod division. Rubinstein will serve as executive chairman.

“As a result of this transaction, we will strengthen the Palm leadership team and create a more effective capital structure,” said Ed Colligan, Palm CEO, in a statement.

“I have tremendous respect for Ed Colligan, Jeff Hawkins and their team, and I am thrilled by the prospect of helping Palm deliver innovative products capable of transforming the mobile-device market,” commented Rubinstein in a statement.  “Approximately 1 billion cell phones are sold each year, and mobile computing is a category with enormous potential. 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.”

Fred Anderson and Roger McNamee, managing directors and co-founders of Elevation, also will join Palm’s board of directors. Rubinstein, Anderson and McNamee will replace Eric Benhamou and D. Scott Mercer.

This is Elevation Partners’ largest investment to date.

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June 5, 2007 - Posted by | Reviews, Technology

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