Dell to go private in landmark $24.4 billion deal

Michael Dell Inc. Dell, private $ 24.4 billion in the biggest leveraged buyout since the financial crisis, an agreement that allows the billionair...

Dell to go private in landmark .4 billion deal

Michael Dell Inc. Dell, private $ 24.4 billion in the biggest leveraged buyout since the financial crisis, an agreement that allows the billionaire chief executive to try to restore the computer business struggling to survive without a investigation of Wall Street.

The transaction, which requires shareholder approval, would end a run of 24 years on public procurement for a company that is designed in a dormitory and quickly reached the top personal computing industry worldwide – must be an also-ran in the last ten years, the price of PC crumbled and customers moved to tablets and smartphones.

Dell executives said Tuesday that the company will stick to a strategy of expanding the supply of software and services for large enterprises, with the goal of becoming a full-service provider of business services in the form of very profitable IBM. He downplayed speculation that Dell might spin off the PC business with low margins on which he made his name.

Dell did not elaborate on what he would do differently as a private entity to skeptics who say that he missed the shift from industry to high tablet computers, smart phones to convince consumer devices and high power electronic devices such as music players and game consoles. Sources of knowledge of the matter said card Dell has any recapitalization of a dissolution of the company before the path of LBO, but not extensive.

“A Dell is probably private costs aggressively, in our opinion. Restructuring But we think that only postpones the inevitable, creating a value trap,” Critical Inc. said analyst Cindy Shaw. “Dell must do more than reduce the cost structure. Needs innovate.”

The transaction will be financed by cash and shares of Michael Dell, money from private equity firm Silver Lake, a loan of $ 2 billion, Microsoft Corp., and debt financing from a consortium of banks. The price of $ 13.65 per share represents a premium of 25 percent of Dell’s stock price before the news of an agreement during flight in January.

The company will now carry a 45-day “go-shop” where others can offer higher.

“While we hope for a better price high, we hope that the Board Dell does a good job in making an open offer to a third party and consider all strategic options done,” said Bill Nygren Who manages the 7.3 Billion Oakmark Fund and $ 3.2 billion Oakmark Select Fund, a position of 250 million Dell. “Should we hear evidence to the contrary, we will make a ruckus.”

Some competitors Dell took pot shots at the agreement in unusually sharp comments that show how the battle is fierce in a standardized PC industry, which has struggled to a decrease in the turnover times worldwide.

Hewlett-Packard Co., which has suffered from years of turmoil faced with challenges in the PC industry, said in a statement that many Dell would “allow existing customers and innovation on the sidewalk,” and promised every opportunity.

Lenovo, which largely consists of the former IBM PC unit, called “distraction financial maneuvers and major changes in the policy” of his rival with emphasis on its own stability and strong financial position.

Dell is considered a model of innovation as recently as the early 2000s, pioneered online ordered-configured PC and work closely with component suppliers and manufacturers Asian ensure production costs are extremely low. But in the fourth quarter of 2012, the share of the global PC market, Dell slipped to just over 10 percent, from 12.5 percent a year earlier as shipments plummeted 20 percent, according to IDC house.

Michael Dell returned to the company as CEO in 2007 after a short break, but was unable to restore to work so far. Dell emphasis on enterprise computing in recent years have led to results – and critics brands compete against incumbents, including IBM and HP, will not be easy, no matter what business structure


PC sales are still the majority of sales of Dell. Analysts say the restructuring has continued to focus on the business market may lead to job losses and more expensive acquisitions. The company has acquired a number of major software and service companies in recent years, looking to reconfigure as a provider of large-scale technology for large companies.

“We recognize that this process will take more time,” Chief Financial Officer Brian Gladden told Reuters. “We’re going to invest, and we must be patient in order to execute the strategy. Structure and a new private company, we have the time and flexibility to really pursue and achieve strategy-end solutions.”

Gladden said the company’s strategy would “generally remain the same” after the transaction is concluded, but “we do not control and limitations associated with operating as a public company. “

Michael Dell, who quietly built a very successful investment, even if the happiness of his eponymous company relaxed, wearing his 16 percent share of the equity Dell to contract, as well as cash from his capital MSD. Bank of America Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets provides debt financing.

Shares of Dell rose 1.2 percent to $ 13.43 in morning trading.


Analysts said Dell would be more versatile as a private company, but it will still face the same difficult market conditions. Successful Transition famous IBM hardware vendor for enterprise IT partner took place when he was trading on public markets.

There is little history that the proposed “going private makes such a transition easier. Freescale, the former semiconductor division of Motorola, was privatized in 2006 to $ 17.6 billion by a group of private equity firms Blackstone Group LP, including the Carlyle Group and TPG Capital LP. Analysts say the debt due impair its ability to compete in the chip industry is capital intensive. Freescale cut slightly less than 5 percent of the workforce in the last year he continued to restructure.


agreement would be the largest private equity-backed, leveraged buyout by Blackstone Group LP are, the Hilton hotel chain in July 2007 to more than $ 20 billion and is the 11th largest ever recorded.

The parties expect the transaction to close to the end of 2014 to the second quarter of Dell, which ends in July. Negotiations News published on January 14, but they started in the latter part of 2012. Michael Dell had the thought of going private so far in 2010 recognized .

involvement of Microsoft in the event piqued much speculation about a renewed strategic partnership, but the software company provides debt financing and Dell said that there are no conditions relating to specific business transaction. Dell has long been loyal to Microsoft Windows operating system , in the heart of the PC business had since its inception.


Microsoft will take the form of a subordinated note of 10 years, the “thing close to fairness”, with nearly 7 percent to 8 percent interest, a source familiar with the situation told Reuters.

Banking sources said the package

of debt financing for the transaction amounts to between $ 11 billion and $ 12 billion to the LBO support. financing ultimate size depends on what part of the existing notes of the company is still not resolved, the sources added. Banks must begin to reach hand to other lenders for loan syndication starting on Tuesday.

JP Morgan and Evercore Partners

were financial advisors, and Debevoise & Plimpton LLP was the legal advisor to the Special Committee of the Board of administration Dell. Goldman Sachs acted as financial advisor and Hogan Lovells as legal advisor to Dell.

Wachtell, Lipton, Rosen & , Katz was legal adviser Michael Dell. BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets were the financial advisors of Silver Lake, and Simpson Thacher & Bartlett LLP is legal advisor.

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