Bloomberg News

Dell Board Said to Vote Monday Night on $24 Billion LBO

February 05, 2013

Dell chairman and CEO Michael Dell

Michael Dell, chairman and chief executive officer of Dell Inc., is seen on Jan. 25, 2013. Taking his company private would give Dell the flexibility to invest more heavily in mobile computing. Photographer: Simon Dawson/Bloomberg

Dell Inc. (DELL:US)’s board was planning to meet last night to vote on an offer to take the company private for about $24 billion, people with knowledge of the matter said.

The deal may be announced early this morning in the U.S., said the people, who asked not to be identified because the process is private. The offer values Dell at $13.50 to $13.75 a share, said two of the people. The Round Rock, Texas-based personal-computer maker closed yesterday at $13.27, for a market value of about $23 billion.

Silver Lake Management LLC will invest more than $1 billion in the buyout and Microsoft Corp. (MSFT:US) will invest about $2 billion, one of the people said. Chief Executive Officer Michael Dell will contribute his 15.7 percent stake, valued at more than $3.6 billion, and contribute $700 million, this person said, giving him a majority stake in the company.

In addition to the equity and about $15 billion in debt, the deal will include billions of dollars in cash from Dell including some from offshore accounts, said one of these people.

Dell is taking the PC maker private after a quarter century as a publicly traded company after struggling to keep pace with competitors such as Apple Inc. in mobile electronics. It has also been slow to come to terms with the shift in business demand toward cloud computing, where storage and software are delivered at low cost over the Internet.

David Frink, a spokesman for Dell, and Frank Shaw, a spokesman for Microsoft, declined to comment. A representative for Silver Lake declined to comment.

Biggest Buyout

Dell climbed 0.5 percent in German trading today to the equivalent of $13.34 as of 10:21 a.m. in Frankfurt. The shares closed at $13.27 yesterday in New York, up 22 percent since Bloomberg was first to report the buyout talks on Jan. 14.

The transaction would be the largest technology leveraged buyout since the financial crisis, according to data compiled by Bloomberg. Going private may help the third-largest PC maker speed up attempts to revive growth and compete more effectively without the scrutiny of public investors.

The biggest technology LBO on record was KKR & Co.’s purchase of payment processor First Data Corp. for more than $25 billion in 2007. A deal for Dell would probably be the largest purchase of a computer maker since at least 2002, when Hewlett- Packard Co. bought Compaq Computer Corp. for about $19 billion.

There were $412.7 billion in private-equity deals last year, a 20 percent decline from 2011 and the smallest amount since the depths of the financial crisis. Other technology companies, including disk-drive maker Seagate Technology Plc (STX:US), have tried to go private and had the talks fall through over valuations or difficulty in financing deals.

Founder Michael Dell, 47, has used takeovers (DELL:US) to expand in products for businesses as consumers choose tablets and smartphones from instead of PCs.

$1,000 Startup

He founded the computer maker almost three decades ago in his University of Texas dorm room with $1,000, building Dell into an empire whose market value once topped $100 billion.

He focused on low-cost manufacturing and distribution, helping transform Dell into the largest PC maker. Dell ceded the CEO role to Chief Operating Officer Kevin Rollins in 2004 only to return to the helm in 2007 after the company lost its top PC spot to Hewlett-Packard Co. (HPQ:US) and earnings fell short of estimates. The company was also beset at the time by an accounting scandal that later resulted in a $100 million settlement with the U.S. Securities and Exchange Commission.

Dell has used acquisitions and management changes to push his company into cloud computing. Still, the overhaul didn’t come quickly enough to put Dell ahead of rivals or keep a leveraged buyout from becoming the most attractive outcome.

To contact the reporter on this story: Jeffrey McCracken at jmccracken3@bloomberg.net

To contact the editor responsible for this story: Jeffrey McCracken at jmccracken3@bloomberg.net


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