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Tuesday, February 05, 2013, 06:50 am PT (09:50 am ET)

Dell going private in $24.4B deal, aided by $2B loan from Microsoft

Computer maker Dell announced on Tuesday that it would be going private in a $24.4 billion deal involving a private equity firm and software giant Microsoft.

Dell Inc.'s board is said to have unanimously voted Monday night on the deal, which will see Silver Lake and Microsoft paying $13.65 per share for the Round Rock, Texas-based PC maker. That is a 25 percent premium over the company's closing share price on Monday, a 35 percent premium over its enterprise value as of January 11, and a 37 percent premium over its average closing share price during the previous 90 calendar days ending January 11.

Dell Ultrabook


Chief Executive Officer Michael Dell will be contributing his own 15.7 percent stake, valued in excess of $3.6 billion, as well as another $700 million from his personal fortune. Mr. Dell will thus take a majority stake in the company, according to reports, and will remain Chairman and CEO of the company.

Financing of the transaction will consist of a combination of Mr. Dell's cash and equity, cash from Silver Lake's investment funds, cash invested by MSD Capital, a $2 billion loan from Microsoft, rollover of existing debt, and debt financing from Bank of America Merrill Lynch, Barclays, Credit Suisse, and RBC Capital Markets, as well as Dell's cash on hand.

The deal is still subject to approval from unaffiliated stockholders.

Speaking on the deal, Mr. Dell said it would signal "an exciting new chapter" for the PC maker, with the buyout delivering "immediate value to our shareholders, 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." Dell said the company had made progress over the past four years, but that going private would allow the firm the "time, investment, and patience" necessary to see that progress through.

Since 2009, Dell's share price has moved from peak to trough, hitting a high of $18.16 in February of 2012, and falling sharply thereafter, only to spike again as rumors of a buyout increased. The PC manufacturer has seen its fortunes waning as the consumer computing market has moved away from the traditional platforms in which Dell specializes and toward smartphones and tablets. Dell's own efforts to enter the mobile computing segment have seen lukewarm receptions at best.