SAN FRANCISCO--PC maker Dell Inc. will become a private company under a leveraged buyout deal worth about $24.4 billion, the company said Tuesday (Feb. 5).
Under the terms of the deal, Michael Dell, the company’s chairman and CEO, will acquire Dell in partnership with Silver Lake Partners, a leveraged buyout specialty firm focused on high-tech.
The deal includes an unspecified amount of cash and equity contributed by Michael Dell, cash funded by investment funds affiliated with Silver Lake, a cash investment from an investment firm owned by Michael Dell and a $2 billion loan from Microsoft. Terms of the deal also include rollover of existing debt and debt financing committed by several financial institutions. A breakout of how much Michael Dell and Silver Lake are each investing was not immediately available.
Michael Dell already owns roughly 14 percent of Dell’s common shares. He will continue to lead the company as chairman and CEO after the completion of the deal, Dell said.
Michael S. Dell
Dell stockholders will receive $13.65 in cash for each share of Dell common stock under the terms of the deal. According to Dell, the price represents a premium of 25 percent over Dell’s closing stock price on Jan. 11, the last trading day before rumors that the company would go private were first published. The price also represents a 37 percent premium over Dell’s average closing price during the 90 days prior to Jan. 11, Dell said.
Dell’s stock price closed at $13.27 Monday.
Dell, founded in the mid-1980s, has in recent years battled rival Hewlett-Packard Co. for leadership in global PC sales.But in the fourth quarter of 2012, Dell trailed both HP and China’s Lenovo Group Ltd. with a PC market share of about 10 percent, according to Gartner Inc. Both HP and deal are facing increased competition from the likes of Lenovo, Acer and other OEMs based in Asia.
A similar move seemed to work for Seagate.
Despite Dell's acquisitions in networking, it seems it is still behind the curve in the post PC era. This move will give the once-retired Dell the breathing room to reshape his company into something that might survive the shifts.
Why go public? The very rich and the hedge funds control so much cash now, why bother with the rubes, and all the public and legal scrutiny it brings. The only reason anyone goes public any more is so that the insiders can cash out. By the time us schmucks can buy, the money has already been made.
It is interesting to watch these companies come and go. I'm not sure if Dell can ever get back to where they were. If I were Michael Dell, I don't think I would do that. But then, I guess that's why I'm not a billionaire.
It's always seemed to me that there are so many advantages to being a private company. Fewer regulatory requirements and you don't need to make quarterly results your sole focus. You can think long term.
The deal looks very lucarative for PEs and Mr. Dell and other parties - given the company has net cash of $5bn (debt of $9bn & Cash of $14bn. So with total purchase price of $24bn, they need to contribute ~19bn or slightly more, in form of debt and equity, of $2bn will come from MSFT. Given the fact, Dell generated FCF of $12bn in last 3 yrs (2010-12). With the av. FCF run rate of $2.5bn a year. PEs can leave firm with 24% return (on EV/EBITDA of 3.0x)after five years with minimal debt.