Michael Dell and partners hope to take Dell private

At $24.4 billion, deal is biggest leveraged buyout since 2008 financial crisis, says NYT
Tools

Dell announced today that Michael Dell is leading the $24.4 billion buyout of Dell, the computer giant he founded.

Michael Dell's group of buyers also includes Silver Lake and Microsoft (Nasdaq: MSFT). It has offered to pay $13.65 per share for Dell's stock, a 37 percent premium over the average closing share price over the last three months. The company's stock was trading at $13.43 in afternoon trading on Tuesday, up 1.2 percent from the opening price.

The company's founder will contribute his 14 percent stake in Dell along with cash through his private investment firm MSD Capital. Silver Lake is contributing $1 billion in cash, and Microsoft will provide a $2 billion loan.

This will be the biggest leveraged buyout since the 2008 financial crisis, according to a report in The New York Times DealBook.

HP (NYSE: HPQ), one of Dell's largest competitors, issued a statement regarding the deal, saying it believes "Dell has a very tough road ahead. The company faces an extended period of uncertainty and transition that will not be good for its customers. And with a significant debt load, Dell's ability to invest in new products and services will be extremely limited."

Michael Dell proposed the buyout deal to Dell's board back in August. He recused himself from the board's discussion and vote.

"I believe this transaction will open an exciting new chapter for Dell, our customers and team members, Michael Dell said in a statement. He added in a memo to employees, "We can immediately deliver value to stockholders, while continuing to execute our long-term growth strategy and focus on helping customers achieve their goals."

The deal provides for a 45-day "go shop" period during which a special committee will solicit and evaluate competing acquisition proposals. The current group of buyers would get a termination fee of $180 million if the company strikes another deal within the period or a $450 million fee after the go-shop period expires.

If the deal is completed, Michael Dell will be trying to turn around a company that has been on the decline for a number of years, losing market share to other computer makers as well as to mobile devices. The company's stock is now about one-quarter of its peak value.

Brian Gladden, Dell's CFO, told The Wall Street Journal that going private will help facilitate the needed changes to turn the company around without the constraints of being a public company.

Investment research firm ISI Group said the price for Dell was "cheap" and could face "shareholder resistance at any price under $15 a share," according to research note quoted by the newspaper.

For more:
- see Dell's announcement
- check out HP's statement
- read The New York Times report
- see The Wall Street Journal article

Related articles:
Dell to launch mobile management appliance in January
HP slashes 850 positions in Germany; plan will cut 27,000 employees worldwide
WSJ: HP might have missed warning sign prior to Autonomy deal