Bloomberg News

Dell, Silver Lake Poised to Clinch $24.9 Billion Buyout

September 12, 2013

Dell Inc. (DELL:US) and Silver Lake Management LLC are poised to clinch a planned $24.9 billion leveraged buyout of the personal-computer maker after a seven-month battle over the company’s fate.

Dell is holding a meeting at its headquarters in Round Rock, Texas, today to finalize shareholder votes on the deal. As of earlier this week, holders of two-thirds of Dell’s voting shares had indicated their support for the proposed transaction, a person with knowledge of the matter has said.

The meeting is set to cap months of controversy since founder Michael Dell and Silver Lake unveiled the deal -- which is the largest LBO since 2007 -- in February. Shareholders including Southeastern Asset Management Inc. opposed the transaction, arguing that it undervalued the company. Billionaire investor Carl Icahn also jumped into the fray with alternative proposals and went to court in Delaware seeking to stop the deal.

The opposition caused Dell to postpone three previous shareholder meetings after being unable to secure enough votes to support the LBO. Michael Dell and Silver Lake twice boosted their offer, from an original $13.65-a-share price to $13.75 a share, and then adding a 13-cent special dividend and guaranteed payment of the company’s third-quarter dividend.

That final proposal has won over investors including Franklin Mutual Advisers and BlackRock Inc. Earlier this week, Icahn dropped his opposition to the LBO.

Less Scrutiny

“While we of course are saddened at our losing the battle to control Dell, it certainly makes the loss a lot more tolerable in that as a result of our involvement, Michael Dell/Silver Lake increased what they said was their ‘best and final offer,’” Icahn wrote in a letter this week.

Some investors remain against the deal. Stephen Yacktman, co-chief investment officer at Austin, Texas-based Yacktman Asset Management Co., said in an interview this week that he plans to vote no on the LBO. His firm, which bought Dell last year at $9 and held 14.9 million of the shares as of a June 30 filing, still stands to make money if the transaction is voted through. Yacktman said it’s difficult to find investments as attractive as Dell.

David Frink, a spokesman for Dell, declined to comment.

Michael Dell, who serves as chairman and CEO, is pushing to take the PC maker private so he can execute a turnaround plan outside the spotlight of public markets. Once the world’s largest PC maker, Dell is now third behind Lenovo Group Ltd. (992) and Hewlett-Packard Co. (HPQ:US), and is grappling with declining PC sales industrywide.

Private Woes

As a private company, Dell may struggle to be as profitable as it once was since the market for PCs based on Microsoft Corp.’s Windows software has become commoditized and technology services aren’t as lucrative as hardware was in its heyday, said Michael Cusumano, a management professor at the Massachusetts Institute of Technology, who has written about the history of the computer industry.

“But it’s better than making no money at all,” he said.

The go-private deal is scheduled to close by the end of Dell’s fiscal third quarter, which ends Nov. 1, and the company isn’t anticipating regulatory hurdles to getting it done, a person with knowledge of the process has said.

To contact the reporter on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net


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