Dell Going Private in $24.4 Billion Agreement

Dell is going private again, as the result of a $24.4 billion deal involving private-equity investors and Microsoft. The deal will close before the end of the second quarter of Dell’s fiscal 2014, according to Reuters.

Dell founder and namesake Michael Dell, who owns roughly 14 percent of the company’s common shares, will continue to lead the newly privatized venture as Chairman and Chief Executive Officer. He will contribute his existing shares to the new company, on top of a “substantial” additional cash investment.

In addition to money from Michael Dell, the deal is being financed via funds from investment firm Silver Lake and a $2 billion loan from Microsoft. Credit Suisse, Barclays, and a number of other financial firms will provide additional debt financing. The deal, of course, will also need to undergo the usual regulatory approvals.

In a statement released by his company, Dell touted privatization as the best route forward. “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,” he wrote. “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.”

Dell first floated the idea of going private to the company’s board of directors in August 2012. That resulted in the creation of a Special Committee, which in turn enlisted a management-consulting firm to conduct an independent analysis. Under the terms of the agreement, that Special Committee has 45 days to actively solicit and evaluate alternative proposals from other interested parties.

As with other hardware manufacturers in the space, Dell faces the specter of a softening PC market. And while Dell has made significant efforts to penetrate other markets—including the launch of a private cloud architecture based on the open-source OpenStack—that weakness has affected its bottom line: for its fiscal 2013 third quarter, the company reported an 11 percent decrease in revenue from the previous year; while it enjoyed an increase in revenue from its servers and services businesses, revenue from its Consumer division dipped 23 percent. Its Large Enterprise, Small and Medium Business, and Public revenue also declined.

“Dell sees the challenging global macro-economic environment continuing in the fourth quarter, which will continue to impact the company’s results,” read the company’s note accompanying those quarterly earnings. “Going forward, the company is committed to its end-to-end solutions strategy and creating value over the long term.”

Evidently, going private is part of that “going forward.”

 

Image: Dell

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