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A $24.4 Billion Bet on Dell's Future

A $24.4 Billion Bet on Dell
February 5, 2013 11:39AM

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"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," said CEO and company founder Michael Dell. "We are committed to delivering an unmatched customer experience and excited to pursue the path ahead."

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Michael Dell is taking the company that bears his name private. As rumored, Dell has signed a leveraged buyout agreement worth $24.4 billion.

Dell, the company's founder, chairman and CEO, in partnership with global technology investment firm Silver Lake Partners and backed in part with Microsoft's money, will acquire Dell. Dell stockholders will receive $13.65 in cash for each share of Dell common stock they hold.

The price represents a 25 percent premium over Dell's closing share price of $10.88 on Jan. 11, 2013. The Dell board unanimously approved a merger agreement, which will ultimately see Dell and Silver Lake take the company private.

It's not a done deal yet. The merger agreement provides for a so-called "go-shop" period, during which the Special Committee -- with the assistance of Evercore Partners -- will actively solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals. The initial go-shop period is 45 days. The agreement also must be approved by a vote of unaffiliated shareholders.

Sheltered from Wall Street

Roger Kay, senior analyst at Endpoint Technologies Associates, told us he was not surprised by the deal, given the rumors that have been circulating on the street for weeks. And he believes it is the right move for Dell.

"Being private will shelter the company from Wall Street while it makes its potentially ungraceful transformation from supplier of commodity PCs over to full-line enterprise solutions provider," Kay said.

Michael Dell, who owns approximately 14 percent of the company's common shares, will continue to lead the company as chairman and CEO. He will maintain a significant equity investment in Dell by contributing his shares of Dell to the new company. He will also make a substantial additional cash investment.

"I believe this transaction will open an exciting new chapter for Dell, our customers and team members. 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 said.

'Committed to this Journey'

Dell pointed to "solid progress" executing that strategy over the past four years, then admitted that it would take still more time, investment and patience. He believes the company's efforts will be better supported by partnering with Silver Lake.

"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," Dell said. "We are committed to delivering an unmatched customer experience and excited to pursue the path ahead."

Microsoft, which sells software to Dell and is part of the investment consortium, will also invest $2 billion.

"Michael Dell is a true visionary and one of the pre-eminent leaders of the global technology industry," said Egon Durban, a Silver Lake managing partner. "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 IT solutions provider."

Tell Us What You Think
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Michael H:

Posted: 2013-02-06 @ 2:36am PT
What happens after the merger of these two companies if I have to buy some shares right now?? Can u explain to me?



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