Feb 06, 2013, 10.03 AM IST
Michael Dell will take computer company Dell Inc private in a $24.4 billion deal that marks the biggest leveraged buyout since the financial crisis.
The company's founder and CEO, and private equity firm Silver Lake are paying USD 13.65 per share in cash for the world's No. 3 computer maker.
The deal is being financed by cash and equity from Michael Dell, cash from Silver Lake, cash from Michael Dell's MSD Capital investment firm, a USD 2 billion loan from Microsoft Corp and debt financing from Bank of America Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets.
The parties expect the transaction to close before the end of the second quarter of Dell's fiscal 2014.
News of the buyout talks first emerged on January 14, although they reportedly started in the latter part of 2012. Michael Dell had previously acknowledged thinking about going private as far back as 2010.
The USD 13.65-per-share price is a premium of about 24 percent to the average USD 11 price of Dell stock before news of the deal talks broke and is far below the USD 17.61 that the shares were trading for a year ago.
"I think the key question here is will shareholders approve this deal, because there is practically no premium where the stock is trading," Sterne Agee analyst Shaw Wu said.
Dell shares opened 0.7 percent higher at USD 13.36 in delayed morning trading.
Dell has steadily ceded market share in PCs to nimbler rivals such as Lenovo Group and is struggling to re-ignite growth. That is in spite of Michael Dell's efforts in the five years since he retook the helm of the company he founded in 1984, following a brief hiatus during which its fortunes waned.
While analysts said Dell could be more nimble as a private company, it will still have to deal with the same difficult market conditions.
"This is an opportunity for Michael Dell to be a little more flexible managing the company," said FBN Securities analyst Shebly Seyrafi. "That doesn't take away from the fact they will have challenges in the PC market like they did before."
Dell Chief Financial Officer Brain Gladden said the company's strategy would "generally remain the same" after the deal closed, while acknowledging a turnaround would take more time and require further investment.
JP Morgan and Evercore Partners were financial advisers, and Debevoise & Plimpton LLP was the legal adviser to the special committee of Dell's board. Goldman Sachs was financial adviser, and Hogan Lovells was legal adviser to Dell.
Wachtell, Lipton, Rosen & Katz was legal adviser to Michael Dell. BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets were financial advisers to Silver Lake, and Simpson Thacher & Bartlett LLP was its legal adviser.
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