9:32 a.m. | Updated
Dell announced on Tuesday that it had agreed to go private in a $24.4 billion deal led by its founder and the investment firm Silver Lake, in the biggest leveraged buyout since the financial crisis.
Under the terms of the deal, the buyers’ consortium, which also includes Microsoft, will pay $13.65 a share in cash. That is roughly 25 percent above where Dell’s stock traded before word emerged of the negotiations of its sale.
Michael S. Dell will contribute his roughly 14 percent stake toward the transaction, and will contribute additional cash through his private investment firm, MSD Capital. Silver Lake is expected to contribute about $1 billion in cash, while Microsoft will loan an additional $2 billion.
Dell’s board is said to have met on Monday night to vote on the deal. In its statement, the company said that Mr. Dell recused himself from any discussions about a transaction and did not vote.
As a newly private company — now more firmly under the control of Mr. Dell — the computer maker will seek to revive itself after years of decline. The takeover represents Mr. Dell’s most drastic effort yet to turn around the company he founded in a college dormitory room in 1984 and expanded into one of the world’s biggest sellers of personal computers.
But the advent of new competition, first from other PC manufacturers and then smartphones and the iPad, severely eroded Dell’s business. Such is the concern about the company’s future that Microsoft agreed to lend some of its considerable financial muscle to shore up one of its most important business partners.
“I believe this transaction will open an exciting new chapter for Dell, our customers and team members,” Mr. Dell said in a statement. “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.”
Still, analysts have expressed concern that even a move away from the unyielding scrutiny of the public markets will let Mr. Dell accomplish what years of previous turnaround efforts have not.
Nevertheless, the transaction represents a watershed moment for the private equity industry, reaching heights unseen over the past five years. It is the biggest leveraged buyout since the Blackstone Group‘s $26 billion takeover of Hilton Hotels in the summer of 2007, and is supported by more than $15 billion of debt financing raised by no less than four banks.
“Michael Dell is a true visionary and one of the preeminent leaders of the global technology industry,” Egon Durban, a managing partner at Silver Lake, said in a statement. “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.”
Mr. Dell first approached the board about taking the company private last August. That prompted the board to form a special committee, with JPMorgan Chase and the law firm Debevoise & Plimpton as advisers. It was charged with considering alternatives to a management buyout, including other deals or borrowing money to pay out a special dividend.
To help ward off accusations of self-dealing by Mr. Dell, the special committee has hired an independent investment bank, Evercore Partners, specifically to oversee a 45-day “go-shop” period in which the company will solicit other potential suitors.
“The special committee and its advisers conducted a disciplined and independent process intended to ensure the best outcome for shareholders,” Alex Mandl, the head of the Dell independent committee, said in a statement. “Importantly, the go-shop process provides a real opportunity to determine if there are alternatives superior to the present offer from Mr. Dell and Silver Lake.”
But beating Mr. Dell comes at a price. Would-be rivals that successfully make an acceptable bid within the go-shop period must pay a $180 million termination fee. If such an offer comes after the 45-day window, that payout grows to $450 million.
Dell itself was advised by Goldman Sachs and the law firm Hogan Lovells, while Mr. Dell retained Wachtell, Lipton, Rosen & Katz as legal counsel. Silver Lake was advised by Bank of America Merrill Lynch, Barclays, Credit Suisse, RBC Capital Markets and the law firm Simpson Thacher & Bartlett.
DealBook: Dell Announces $24 Billion Buyout, Biggest Since 2007
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DealBook: Dell Announces $24 Billion Buyout, Biggest Since 2007
