Dell to go Private in $24.4bn Buyout by Michael Dell and Silver Lake

Computer manufacturer Dell has entered an agreement to be acquired by founder and CEO Michael Dell and US private equity firm Silver Lake in a deal valuing the company at $24.4bn (£15.5bn).

Rumoured for the past few weeks, the deal will value Dell at $13.65 per share - a 37 percent premium over the average closing price of the company during the previous 90 days ending 11 January.

Michael Dell said: "I believe this transaction will open an exciting new chapter for Dell, our customers and team members. 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.

The deal will also be financed by a $2bn loan from Microsoft, as was also reported last week, as well as rollover of existing debt and debt financing that has been committed by a number of Dell's banking partners, including Merrill Lynch, Barclays and Credit Suisse.

Shareholders will receive $13.65 in cash for each share of common stock they hold. This figure is 25 percent higher than Dell's closing price of $10.88 on 11 January, the last trading day before rumours of a possible privatisation were first published.

The Dell board of directors acting on the recommendation of a special committee of independent directors are said to have "unanimously approved a merger agreement under which Michael Dell and Silver Lake Partners will acquire Dell and take the company private," a press release from the computer maker said; these conditions include a vote of the unaffiliated stockholders

The company CEO added: "I am committed to this journey and I have put a substantial amount of my own capital at risk together with Silver Lake, a world-class investor with an outstanding reputation. We are committed to delivering an unmatched customer experience and excited to pursue the path ahead."

Special committee

A special committee was formed after Dell first approached the company's board of directors in August 2012 with an interest in taking the company private, and led by Lead Director Alex Mandl, the committee retained independent financial and legal advisors J.P. Morgan and Debevoise & Plimpton LLP to advise it on the acquisition proposal and subsequent agreement.

The next stage will see the merger enter a "go-shop" period, during which time the special committee will receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals to those put forward by Dell and Silver Lake.

This go-shop period will last for 45 days and after that the committee with be able to enter discussions with any party that submitted a qualifying proposal. A successful competing bidder who makes a proposal during that 45 day period will bear a $180m termination fee, and for competing bidders who did not qualify during the initial go-shop period would incur a $450m termination fee.

Mandl said: "The Special Committee and its advisors conducted a disciplined and independent process intended to ensure the best outcome for shareholders. Importantly, the go-shop process provides a real opportunity to determine if there are alternatives superior to the present offer from Mr Dell and Silver Lake."

"Michael Dell is a true visionary and one of the preeminent leaders of the global technology industry," said Egon Durban, a managing partner at Silver Lake, adding that Silver Lake "is looking forward to partnering with him, the talented management team at Dell and the company's transformation strategy to become an integrated and diversified global IT solutions provider."

Following the transaction, Michael Dell will remain the company chairman and chief executive officer, and will maintain a "significant equity investment" in Dell by "contributing his shares of Dell to the new company, as well as making a substantial additional cash investment."

Reports last week speculated that this cash investment could be between $500m and $1bn of Dell's private fortune.

The deal will also be financed by a $2bn loan from Microsoft, as was also reported last week, as well as rollover of existing debt and debt financing that has been committed by a number of Dell's banking partners, including Merrill Lynch, Barclays and Credit Suisse.