Dell to Go Private in $24.4 Billion Deal

Ending weeks of rumors and speculation, Dell Inc. today said that it would be going private in a $24.4 billion deal that would put the company in the hands of founder and CEO Michael Dell and private equity firm Silver Lake.

Under the terms of the agreement, Dell shareholders will receive $13.65 in cash for each share of Dell common stock they hold, a premium of 25 percent over Dell’s closing share price of $10.88 on Jan. 11, 2013, the last trading day before rumors of a possible going-private deal surfaced.

The agreement includes a 45-day “go-shop” period, where Dell and management consulting firm Evercore Partners will actively solicit better offers and potentially enter into negotiations with other parties. Following the initial 45 day period, a committee will be permitted to continue discussions and enter into or recommend a transaction with any person or group that submitted a qualifying proposal during the 45-day period, the company said. A successful competing bidder who makes a qualifying proposal during the initial go-shop period would bear a $180 million termination fee. For a competing bidder who did not qualify during the initial go-shop period, the termination fee would be $450 million, Dell said.

“I believe this transaction will open an exciting new chapter for Dell, our customers and team member,” CEO Michael Dell said in a statement. “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.”

“Michael Dell is a true visionary and one of the preeminent leaders of the global technology industry,” said Egon Durban, a Silver Lake Managing Partner. “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.”

Transaction details

The transaction will be financed through a combination of cash and equity contributed by Michael Dell, cash funded by investment funds affiliated with Silver Lake, cash invested by MSD Capital, L.P., 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, and cash on hand, the company said.

“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,” Mr. Dell said. “I am committed to this journey and I have put a substantial amount of my own capital at risk together with Silver Lake, a world-class investor with an outstanding reputation. We are committed to delivering an unmatched customer experience and excited to pursue the path ahead.”

The transaction is subject to other customary conditions and regulatory approvals, and is expected to close before the end of the second quarter of Dell’s FY2014.

Dell, which has expanded its security portfolio over the past few years, mainly through acquisitions, will continue to be headquartered in Round Rock, Texas.