Dell to go private in $24.4B deal led by founder

Founder betting on turnaround with huge buyout
2013-02-06T00:00:00Z Dell to go private in $24.4B deal led by founderThe Associated Press The Associated Press
February 06, 2013 12:00 am  • 

SAN FRANCISCO - Slumping personal computer maker Dell is bowing out of the stock market in a $24.4 billion buyout that represents the largest deal of its kind since the Great Recession dried up the financing for such risky maneuvers.

The complex agreement announced Tuesday will allow Dell Inc.'s management, including founder Michael Dell, to attempt a company turnaround away from the glare and financial pressures of Wall Street.

Dell stockholders will be paid $13.65 per share to leave the company on its own. That's 25 percent more than the stock's price of $10.88 before word of the buyout talks trickled out three weeks ago. But it's a steep markdown from the shares' price of $24 six years ago when Michael Dell returned for a second go-round as CEO.

Dell shares rose 15 cents to close at $13.42, indicating that investors don't believe a better offer is likely.

The chances of a successful counteroffer look slim, given the forces lined up behind the current deal.

Michael Dell, the company's largest shareholder, is throwing in his 14 percent stake and an undisclosed sliver of his $16 billion fortune to help finance the sale to a group led by the investment firm Silver Lake.

Software maker Microsoft, which counts Dell among its biggest customers, is backing the deal by lending $2 billion to the buyers. The remaining money to pay for the acquisition is being borrowed through loans arranged by several banks, saddling Dell with an estimated $15 billion in debt that could raise doubts about its financial stability among its risk-averse corporate customers.

The sale is structured as a leveraged buyout, which requires the acquired company to repay the debt taken on to finance the deal.

Dell's sale is the second-highest-priced leveraged buyout of a technology company, trailing the $27 billion paid for First Data Corp. in 2007.

The deal is the largest leveraged buyout of any type since November 2007, when Alltel Corp. sold for $25 billion to TPG Capital and a Goldman Sachs subsidiary. Within a few months, the U.S. economy had collapsed into the worst recession since World War II.

Dell's decision to go private is a reflection of the tough times facing the personal computer industry as more technology spending flows toward smartphones and tablet computers. PC sales fell 3.5 percent last year, according to the research group Gartner Inc., the first annual decline in more than a decade. What's more, tablet computers are expected to outsell laptops this year.

The shift has weakened longtime stalwarts such as Dell, fellow PC maker Hewlett-Packard Co., chipmaker Intel Corp. and Microsoft.

Michael Dell, 47, is betting that his company will be able to evolve into a more diversified seller of technology services, business software and high-end computers without having to pander to the stock market's fixation on whether earnings are growing from one quarter to the next. Dell expects to complete the sale by the end of July.

Once the deal closes, Dell's stock will stop trading on the Nasdaq Stock Market 25 years after Dell's initial public offering.

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