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February 5, 2013

Dell To Go Private In $24.4B Buyout

Microsoft Proffers $2B Loan

Dell logo

The world’s third largest PC maker is going private.

Dell has signed a merger agreement today (Feb. 5) under which founder and CEO Michael Dell will acquire the company for a cool $24.4 billion — the largest leveraged buyout since the financial crisis six years ago.

Dell, in partnership with global technology investment firm Silver Lake and with a $2-billion loan from Microsoft, will take the company private subject to a number of conditions such as a vote of the unaffiliated stockholders.

Dell stockholders will receive $13.65 in cash for each share of Dell common stock held. The price represents a premium of 25 percent over Dell’s closing share price of $10.88 on Jan. 11, the last trading day before rumors of a possible going-private transaction were first published.

Dell headquarters in Round Rock, Texas.

Dell headquarters in Round Rock, Texas.

The transaction is expected to close before the end of the second quarter of Dell’s 2014 fiscal year.

Dell stock has lost more than 50 percent of its value since January 2007 when Michael Dell returned to his role as CEO, taking over from Kevin Rollins who resigned after four out of five quarterly reports failed to meet expectations.

Going private will better enable Michael Dell to change the company’s strategy and cut more jobs.

“I believe this transaction will open an exciting new chapter for Dell, our customers and team members,” Michael Dell said in a statement. “We can deliver immediate value to stockholders, while we continue the execution of our long-term strategy and focus on delivering best-in-class solutions to our customers as a private enterprise.

“Dell has made solid progress executing this strategy over the past four years, but we recognize that it will still take more time, investment and patience, and I believe our efforts will be better supported by partnering with Silver Lake in our shared vision.

“I am committed to this journey and I have put a substantial amount of my own capital at risk together with Silver Lake, a world-class investor with an outstanding reputation. We are committed to delivering an unmatched customer experience and excited to pursue the path ahead.”

Michael Dell, who owns approximately 14 percent of Dell’s common shares, will continue as CEO. According to a company press release, he will maintain a “significant equity investment” in Dell by contributing his shares to the new company, as well as making a substantial monetary investment.

Silver Lake, sources have said, came up with about $15 billion to put toward the buyout.

Although Dell will no longer have to answer to shareholders, it is now shouldering significant debt to Microsoft as well as Bank of America Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets.

Microsoft’s investment is a bid to ensure “the long-term success of the entire PC ecosystem,” the firm said in a separate statement.

“We’re in an industry that is constantly evolving,” Microsoft said. “As always, we will continue to look for opportunities to support partners who are committed to innovating and driving business for their devices and services built on the Microsoft platform.”

According to news reports, Microsoft opted to loan the money rather than having a stake in one of its PC-making partners to avoid raising the ire of Dell’s rivals with whom Microsoft also does business.

One Response to “Dell To Go Private In $24.4B Buyout

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