John Phelan, who helps manage Michael Dell’s personal fortune, said the firm won’t have to sell any holdings to finance its part in the proposed $24.4 billion buyout of Dell Inc. (DELL:US)
MSD agreed to provide $750 million for the deal, of which $500 million will come from Michael Dell and $250 million from a sister firm that raises money from outside investors, Phelan said. While Michael Dell could have financed the deal by himself, the participation of Silver Lake Management LLC adds a perspective that may benefit the computer maker.
“Silver Lake is a good value-added partner,” Phelan, a co-founder of MSD Capital LP, said today in an interview with Bloomberg Television’s Erik Schatzker. “It’s a situation where you hope that one plus one equals three.”
Michael Dell, who founded the computer company with $1,000 while attending the University of Texas in 1984 and now owns a 15.6 percent stake (DELL:US), is seeking to take the company private for $13.65 a share to transform the computer maker into a contender in tablets and cloud computing. The buyout has run into opposition from Southeastern Asset Management Inc., which, as Dell’s largest outside stockholder, has estimated that its underlying value is closer to $24 a share.
Southeastern teamed up with financier Carl Icahn to propose an alternative to the buyout in which they would pay investors $12 a share in cash or stock in a company that would remain publicly traded.
Dell shares declined 3 cents, or 0.2 percent, to $13.42.
Phelan said Silver Lake’s participation reflects Michael Dell’s belief in partnering with other investors. Silver Lake helped bring Microsoft Corp. into the deal, he said. The software company agreed to provide a $2 billion loan for the transaction.
“Its always good to have another set of eyes, another perspective,” Phelan said in the interview at the Bloomberg Link Hedge Funds Summit in New York.
Dell is urging stockholders to vote in favor of the founder’s buyout offer at a meeting scheduled for July 18, stating in securities filings that it is the “best alternative available.” Southeastern, who together with Icahn holds almost 13 percent of Dell shares, is urging fellow stockholders to take no action on Michael Dell’s buyout proposal.
Phelan and Glenn Fuhrman, both of whom are former executives at Goldman Sachs Group Inc., formed MSD in 1998 as the exclusive investment vehicle for the Dell family fortune. Having started with an initial contribution of $400 million in capital from Dell, MSD now has more than $13 billion in assets that are managed by various investment groups, including a private equity unit, a real estate team, and a special opportunities arm.
In July 2009, Phelan and Fuhrman set up a separate firm called MSDC Management LP to run funds with capital from outside investors as well as the Dell family. The firm’s goal is to have eventually as much as 40 percent of assets from outside clients.
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