• Dell agrees to $24 billion buyout
     | February 06,2013
    AP Photo

    The exterior of Dell Inc.’s offices in Santa Clara, Calif. Slumping personal computer maker Dell announced Tuesday.

    AUSTIN, Texas — Dell Inc. has agreed to be bought by an investment group headed by CEO and founder Michael Dell for a little more than $24 billion, the company said Tuesday.

    Shareholders in the Round Rock, Texas-based company will receive $13.65 a share if the deal goes through, bringing the total value of the transaction to $24.4 billion, the company said.

    The deal would be the largest leveraged buyout since the start of the world financial crisis in 2008. Dell Inc. expects the deal will be approved by shareholders and completed before the end of July.

    Dell will team with a California investment company, Silver Lake Partners, in the deal. Also participating is MSD Capital, Michael Dell’s personal investment company. Microsoft Corp., the world’s largest software company, has agreed to lend $2 billion to help finance the deal.

    Dell board member Alex Mandl said a special committee of the company board of directors and its advisers studied the deal carefully to protect “the best outcome for shareholders.”

    Michael Dell will continue to head the company during the transition.

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

    Dell, the third-largest maker of personal computers, has been under pressure in the past year from declining PC sales and intensifying pressure from low-cost competitors in Asia.

    The company’s shipments of PCs dropped by nearly 21 percent in the quarter ended in December, according to the International Data Corp. market research firm.

    Michael Dell first approached the board in August of last year with the concept of taking the company private.

    Egon Durban, a managing partner of Silver Lake, said a key to the deal was Michael Dell’s involvement.

    “Michael Dell is a true visionary and one of the preeminent leaders of the global technology industry,” Durban said. “Silver Lake is looking forward to partnering with him, the talented management team at Dell and the investor group to innovate, invest in long-term growth initiatives and accelerate the company’s transformation strategy to become an integrated and diversified global (information technology) solutions provider.”

    A special committee of the board led by Mandl retained independent financial counsel and legal advisers to advise the committee on strategic alternatives, the acquisition proposal and the subsequent negotiation of the merger agreement.

    It also engaged a leading management consulting firm to conduct an independent analysis, including a review of strategic alternatives for Dell and the opportunities for the company as a public entity.

    The buyout will be financed by a combination of cash and company stock contributed by Michael Dell, an investment from Silver Lake Partners, cash invested by MSD Capital, a $2 billion loan from software maker Microsoft Corp. and debt financing from a consortium of four banks, Bank of American Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets. Michael Dell owns about 14 percent of the company’s shares.

    The price to shareholders represents a 25 percent premium over the closing price of the stock on Jan. 11, the last trading day before rumors of the buyout deal became public.

    The buying group will pay cash for all shares of the company not held by Michael Dell and certain other members of management.

    Dell Inc. has about 14,000 workers in Central Texas and more than 100,000 worldwide.

    The next step in the buyout process is a 45-day “go-shop” period in which the company will solicit alternative buyout offers.

    If no competing offer is made, the company is expected to prepare a proxy statement and proceed with a vote of shareholders. A majority shareholders will have to approve the the deal before the company goes private.

    Analysts say the buyout gives Dell a better pathway forward in a challenging market for sales of personal computers and other information technology.

    Dell over the past five years has paid an estimated $13 billion for more than two dozen companies as it built its portfolio of advanced products and services in an effort to become a “one-stop shop” for advanced hardware, software and services.

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