Shortly after unveiling its Linux-based mobile phone and “mobile companion” product roadmaps, Palm has announced a $325 million investment. If approved, the transaction would give Elevation Partners a 27 percent ownership stake, and enable Palm to hire iMac and iPod engineering lead Jon Rubinstein as executive board chairman.

Palm Foleo (Click for details)

According to Palm, it would take Palm about 18 months to begin shipping products created under the leadership of Rubinstein. Meanwhile, the company plans to begin shipping its Linux-based Foleo “mobile companion” in August, followed by its first Linux-based Treo smartphones by end of year.

The deal is the largest yet for Elevation Partners, run by Fred Anderson, formerly Apple's long-time CFO, and veteran investor Roger McNamee. It would buy Elevation 38.2 million shares of preferred stock, convertible to common stock at $8.50 per share. Anderson and McNamee would then replace Eric Benhamou and D. Scott Mercer on Palm's board, giving Elevation representation proportional to their investment.

To sweeten the pie for current investors, a cash divident of $9 per share would be paid out, equivalent to 55 percent of current share value. Thus, current investors would get about half their share value back — treatable as a “return of capital” for most — and still retain a three-quarters stake, Palm said. The pay-out would be financed using the $350 million from Elevation, existing cash-on-hand, and an additional $400 million loan, to be financed over the next 6.5 years by Morgan Stanley and JP Morgan, according to CFO Andy Brown.

Morgan Stanley and JP Morgan would also establish a revolving credit account with a limit of $40 million for Palm, although the company would not need to use the credit line initially, since it expects to have about $300 million in cash-on-hand after the deal closes, partly thanks to $60 million in expected land sales proceeds, Brown said.

 
This article was originally published on LinuxDevices.com and has been donated to the open source community by QuinStreet Inc. Please visit LinuxToday.com for up-to-date news and articles about Linux and open source.