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

Posted:
in General Discussion edited January 2014
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.
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Comments

  • Reply 1 of 73
    At least, he's putting his money where his mouth is. He's giving back the money to shareholders...
  • Reply 2 of 73
    philboogiephilboogie Posts: 7,671member
    First one citing that old line from Michael is, well, he just is!

    edit: already done, some 26 seconds before me.


    Well, sounds like overpaid, bit like Google's 12.5B for Motorola Mobility. What to expect, Airbook clones from MS?
  • Reply 3 of 73


    Can't wait to see Apple doing the same (for different reasons).


     


    I really like what Dell is doing. Ubuntu high end laptops, more quality, etc. It's a shame they accepted Microsoft's bribe, so we won't see high-class chromebooks...


     


    I really hope they go head on software and services, maybe even a new Office suite to compete on the windows market (that's still huge), more contribution to open source, mac apps (this one would be great). 

  • Reply 4 of 73


    I could care less about Dell, but this is a good move for them. 

  • Reply 5 of 73


    700 million of his own personal fortune.....damn that's a lot of money.  Do they take checks?

  • Reply 6 of 73
    jmc54jmc54 Posts: 207member


    my how the worm has turned! Steve must be looking down, smiling!!

  • Reply 7 of 73


    "and focus on delivering best-in-class solutions to our customers"


     


    Best-in-class?  Hmmmm.... a new strategy.


     


    I'll believe it when I see it.


     


    Should have focused on that a long time ago Mike.

     

  • Reply 8 of 73
    anonymouseanonymouse Posts: 6,653member


    I'm surprised that no one has yet commented on the possible implications of Microsoft purchasing a large stake in Dell.

  • Reply 9 of 73
    gazoobeegazoobee Posts: 3,754member

    Quote:

    Originally Posted by lightknight View Post



    At least, he's putting his money where his mouth is. He's giving back the money to shareholders...


     


    I'm surprised that no one has pointed out the irony in the articles i've read about this so far.  He is indeed doing the exact thing that he said Apple should do in that famous stupid quote of his. 

  • Reply 10 of 73

    Quote:

    Originally Posted by anonymouse View Post


    I'm surprised that no one has yet commented on the possible implications of Microsoft purchasing a large stake in Dell.



    Microsoft does nothing...


     


    That's just a "no chromebooks please!"

  • Reply 11 of 73
    asciiascii Posts: 5,941member

    Quote:

    Originally Posted by anonymouse View Post


    I'm surprised that no one has yet commented on the possible implications of Microsoft purchasing a large stake in Dell.



    What are your thoughts - MS to make their own hardware with Dell's help?


     


    Imagine how it would shake up the tech world if MS decided to only sell Windows with their own hardware? All those third party computer makers overseas would be left with only Linux.

  • Reply 12 of 73

    Quote:

    Originally Posted by Gazoobee View Post


     


    I'm surprised that no one has pointed out the irony in the articles i've read about this so far.  He is indeed doing the exact thing that he said Apple should do in that famous stupid quote of his



    What stupid quote? Are you insinuating something?


     


     


     


    /s image

  • Reply 13 of 73
    irnchrizirnchriz Posts: 1,603member
    Cool, he has done step 1, bought it back. Now when does he shut it down?
  • Reply 14 of 73
    gazoobeegazoobee Posts: 3,754member

    Quote:

    Originally Posted by pedromartins View Post


    Can't wait to see Apple doing the same (for different reasons).


     


    I really like what Dell is doing. Ubuntu high end laptops, more quality, etc. It's a shame they accepted Microsoft's bribe, so we won't see high-class chromebooks...


     


    I really hope they go head on software and services, maybe even a new Office suite to compete on the windows market (that's still huge), more contribution to open source, mac apps (this one would be great). 



     


    I don't understand your comments.  If Microsoft is buying Dell (and they basically are despite the details), there won't be any more Ubuntu laptops, Chromebooks etc. 


     


    Anyone can see this is "Dell going private" merely as a preamble to being absorbed/destroyed by Microsoft.  They've done this enough times, it should be clear to everyone.  


    I must admit I admire how Microsoft is doing this lately without *technically* having to buy the company.  Like the way they enslaved/destroyed Nokia, and forced them to do their bidding and become a Microsoft subsidiary without *technically* having to buy them out.  It saves way more money that way and there's less downside for Microsoft itself.  


     


    Here they've managed to essentially "capture" Dell, for only 2 billion dollars.  It's a business victory even if it isn't a victory for common sense.  

  • Reply 15 of 73

    Quote:

    Originally Posted by anonymouse View Post


    I'm surprised that no one has yet commented on the possible implications of Microsoft purchasing a large stake in Dell.



     


    I think MSFT is only providing a loan and not taking an equity stake.  They clearly have a vested interest in getting the deal done (otherwise why lend the cash) but I don't think they are taking an active management role in Dell, just becoming a creditor. 

  • Reply 16 of 73


    Phase 1 - collect underpants

  • Reply 17 of 73

    Quote:

    Originally Posted by island hermit View Post


    "and focus on delivering best-in-class solutions to our customers"


     


    Best-in-class?  Hmmmm.... a new strategy.


     


    I'll believe it when I see it.


     


    Should have focused on that a long time ago Mike.

     



    Well said....I put Dell in that class of companies that are just trying to sell "crap" as expensively as possible to a lot of unsuspecting customers. I like companies that "best in class" is already in their DNA. If I worked for Dell, I would be ashamed of the sh*t they have been producing! :)

  • Reply 18 of 73
    anonymouseanonymouse Posts: 6,653member

    Quote:

    Originally Posted by ascii View Post


    What are your thoughts - MS to make their own hardware with Dell's help?


     


    Imagine how it would shake up the tech world if MS decided to only sell Windows with their own hardware? All those third party computer makers overseas would be left with only Linux.



     


    They are somewhat constrained on at least Intel x86 hardware in that regard, but not on other CPU architectures.

  • Reply 19 of 73
    anonymouseanonymouse Posts: 6,653member

    Quote:

    Originally Posted by wubbus View Post


     


    I think MSFT is only providing a loan and not taking an equity stake.  They clearly have a vested interest in getting the deal done (otherwise why lend the cash) but I don't think they are taking an active management role in Dell, just becoming a creditor. 



     


    It does seem that it's just a loan, and that they are committing to bailing out at least the major players in the PC industry, if necessary. Who would have foreseen that need a decade ago?

  • Reply 20 of 73

    Quote:

    Originally Posted by anonymouse View Post


    I'm surprised that no one has yet commented on the possible implications of Microsoft purchasing a large stake in Dell.



     


    It will be interesting to see the results of the competing forces. On one hand you have the usual strategy of drowning the company with debt used to pay back investors with a profit. On the other you have Microsoft looking for another captive "partner" like Nokia.

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