Dell buyout approved by board

Former industry pioneer to end 24-year tenure as publicly traded company

Tags: Dell CorporationMergers and acquisitions
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Dell buyout approved by board At a currently agreed price per share of $13.65 the buyout would be valued at $23.7bn. (Getty Images)
By  Stephen McBride Published  February 6, 2013

Dell Inc's board has approved a leveraged buyout that could end the tech giant's 24-year tenure as a public company, Reuters reported.

Michael Dell, as a proposed majority stakeholder in the private entity, is not eligible to vote in a shareholder poll that will decide the final fate of the LBO. Dell, founder and chief executive of the company, owns approximately 16% of its shares and will contribute his equity to the buyout as well as an as-yet undisclosed cash sum. Investment firm Silver Lake Partners will put up $1bn in cash and Microsoft is lending $2bn. According to various reports, somewhere between $11bn and $15bn will come from debt financing spread across four lenders: Barclays, Bank of America Merrill Lynch, Credit Suisse and RBC Capital.

At a currently agreed price per share of $13.65 the buyout would be valued at $23.7bn, but a 45-day "go-shop" period may introduce higher bidders.

Some shareholders have expressed frustration at the company's lack of communication over its industry strategy as a private entity, arguing that they need more information to determine if the stock is adequately priced.

"This feels like the ultimate insider trade. Why weren't the plans and projections that Michael Dell has going forward been shared with me and other shareholders?" said Frederick "Shad" Rowe, general partner of Greenbrier Partners who sold 400,000 Dell shares on Tuesday. "I was so irritated I didn't want to think about it anymore," he said.

Dell is a former industry leader and a pioneer in online sales of PCs, but its failure, among many in the technology Old Guard, to lead in the mobility space has led to crumbling stock prices and disenchanted shareholders. IDC puts the company's Q4 share of the shrinking PC market at just over 10, compared with 12.5% a year earlier.

"A private Dell is likely to more aggressively cut costs, in our view. But we think merely restructuring only postpones the inevitable, creating a value trap," said Discern Inc analyst Cindy Shaw. "Dell needs to do more than reduce its cost structure. It needs to innovate."

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