Michael Dell Teams Up with Silver Lake and Microsoft for Dell Buyout

Dell to Become Private Company in Record $24.4 Billion Transaction

by Anton Shilov
02/05/2013 | 06:25 PM

Dell on Tuesday announced it has signed a definitive merger agreement under which Michael Dell, Dell’s founder, chairman and chief executive officer, in partnership with global technology investment firm Silver Lake, will acquire Dell. The buyout, which is valued by Mr. Dell himself, Silver Lake LLC, Microsoft Corp. and a group of banks, outshines previous record transaction, the acquisition of Compaq by Hewlett-Packard a decade ago.

Dell Becomes Private Enterprise in $24.4 Billion Buyout


Under the terms of the agreement, Dell stockholders will receive $13.65 in cash for each share of Dell common stock they hold, in a transaction valued at approximately $24.4 billion. The price represents a premium of 25% over Dell’s closing share price of $10.88 on January 11, 2013, the last trading day before rumors of a possible going-private transaction were first published; a premium of approximately 35% over Dell’s enterprise value as of Jan. 11, 2013; and a premium of approximately 37% over the average closing share price during the previous 90 calendar days ending Jan. 11, 2013. The buyers will acquire for cash all of the outstanding shares of Dell not held by Mr. Dell and certain other members of management.

The transaction will be financed through a combination of cash and equity contributed by Mr. Dell, cash funded by investment funds affiliated with Silver Lake, a cash investment by an investment fund affiliated with MSDC Management, a $2 billion loan from Microsoft, rollover of existing debt, as well as debt financing that has been committed by BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets (in alphabetical order), and Dell’s cash on hand. There is no financing condition.

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.

Dell to Intensify Current Strategy

Michael Dell first approached Dell’s doard of directors in August 2012 with an interest in taking the company private. Dell then formed a special committee and hired a leading management consulting firm to conduct an independent analysis, including a review of strategic alternatives for Dell and opportunities for the company as a public entity.

“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 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 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,” said Michael Dell.

Dell has been trying to rebuild itself for over four years now, but the process is hard to execute as a public company since many investors usually get disappointed with even minimal losses. Taking the company private will help Michael Dell not only consolidate the power at his own hands and carry out decisions without taking into consideration opinions of public investors, but also to transform the company much faster.

"Michael Dell is a true visionary and one of the preeminent leaders of the global technology industry. 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," said Egon Durban, a Silver Lake managing partner.