by Staff Writers
New York (AFP) Feb 5, 2013
Dell unveiled plans to go private Tuesday in a $24.4 billion deal which would give founder Michael Dell a chance to reshape the former number one PC maker away from the spotlight of Wall Street.
"I believe this transaction will open an exciting new chapter for Dell, our customers and team members," Michael Dell said in unveiling the deal with investment firm Silver Lake, and backed by a $2 billion loan from Microsoft.
The company said it had signed "a definitive" agreement that gives shareholders $13.65 per share in cash -- a premium of 25 percent over Dell's closing share price on January 11, before reports of the deal circulated.
The move, which would delist the company from stock markets, could ease some pressure on Dell, which is cash-rich but has seen profits slump, as it tries to reduce dependence on the slumping market for personal computers.
The plan is subject to several conditions, including a vote of unaffiliated stockholders.
It calls for a "go shop" period to allow shareholders to determine if there is a better offer.
"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 said of the plan.
The company founder said Dell has made progress in its turnaround strategy "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," he added.
Under terms of the deal, Michael Dell, who currently owns some 14 percent of Dell's common shares, would remain chairman and chief executive and boost his stake with "a substantial additional cash investment," a company statement said.
Additional cash for the deal will come from Silver Lake, a major tech investment group, and MSD Capital, a fund created to manage Michael Dell's investments.
The plan also calls for a $2 billion loan from Microsoft, rollover of existing debt, and financing committed by Bank of America-Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets.
Analysts have said the deal may give the company a chance to regain some footing in a market in which smartphones and tablets are overtaking laptop and desktop computers.
"Michael has been trying to turn Dell into a supplier of enterprise solutions for a long time," said Roger Kay, analyst with Endpoint Technologies.
"He has pleaded with Wall Street to give him time."
Kay told AFP that going private would make a transition easier by avoiding the spotlight of "ugly results" which could come from scaling back the PC business.
"The commodity PC business has been suffering," Kay said.
"Dell may probably keep the higher margin consumer lines but maybe look at rest of the portfolio."
Kay added that Microsoft's participation in the deal suggests that Dell would remain in PCs and the Windows-based ecosystem.
Deutsche Bank's Chris Whitmore in a research note this week that Dell "would be free to execute his turnaround without the scrutiny of the public market" with "flexibility to do what he sees fit in order to drive long-term value."
The analyst added that Dell "could get more aggressive" in its enterprise software and cloud services, to make the company less dependent on PCs.
The Texas-based computer maker, which Dell started in his college dormitory room, once topped a market capitalization of $100 billion as the world's biggest PC producer.
Dell is now the number three global PC maker, behind Hewlett-Packard and Lenovo, according to the latest report from market tracker IDC, showing Dell's market share of 10.6 percent in the fourth quarter.
Rival HP said in a statement that Dell "has a very tough road ahead" and "an extended period of uncertainty and transition that will not be good for its customers," adding that HP "plans to take full advantage of that opportunity."
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