The deal calls for payment of $13.65 per share, for a total buyout cost of about $24.4 billion. The offering share price is about 25 percent higher than Dell’s closing price just a few days back and the total cost of the deal makes it the largest leveraged buyout since the financial crisis rocked the nation starting in 2008.
Details of the buyout emerged over the past few days and were finalized on Monday, February 4, 2013. Private equity firm Silver Lake, along with Microsoft and Michael Dell himself, are chipping in money to complete the buyout. According to a report issued by Yahoo News, Microsoft is investing about $2 billion and Silver Lake $1 billion. Michael Dell is contributing much of the balance, ensuring that he maintains control of the now private business.
Dell’s board met Monday evening, February 4, 2013, both to vote on the deal and discuss its implementation. One of the components of the deal is the right, by Dell, to shop for better offers. The board set a 45 day period to look for other bids, after which the deal will be considered done and sealed. If Dell does find a better offer, the present buyout consortium would receive $180 million as a termination fee. Depending on the size of the counter- offer, the termination fee could climb to $450 million.
Dell has struggled financially as of late. Its PC market share has been in a steady decline and its share price has followed suit. A year ago, a share was trading close to $18. A few days ago, the same share was selling for about $11. The computer giant, once dominate in its field, has slowly lost market share to companies like Lenovo Group and others.
With Dell now a private firm, the company can focus its efforts more on products, improvement, and growth and not worry so much about shareholder value and pressures from Wall Street. Dell has been around since 1984 but today remains far below its peak in the 1990s and early 2000’s, when the PC market was still young and business was booming. It will be interesting to see how business changes at Dell now that the public company pressures are history.
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