It is the largest privatisation deal in IT history, worth US$24.4 billion. That price values each share at $13.65, a significant 37% premium over the average closing share price over the last three months. It also represents a premium of 25% over Dell’s closing share price of $10.88 on 11 January, the last trading day before rumours of a possible going-private transaction were first published by Bloomberg.
Under the terms of the deal, the Dell board of directors has 45 days to seek better offers – which are extremely unlikely. The so-called ‘go-shop’ period allows the board to “actively solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals”.
The deal involves a US$2 billion loan from Microsoft.
The Dell board has unanimously approved the agreement, under which Michael Dell and Silver Lake Partners will acquire Dell and take the company private subject to a number of conditions, including a vote of the unaffiliated stockholders.
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“I believe this transaction will open an exciting new chapter for Dell,” said Michael Dell. “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.
“Dell has made solid progress executing this strategy over the past four years, but we recognise that it will still take more time, investment and patience. We are committed to delivering an unmatched customer experience and excited to pursue the path ahead.”
Following completion of the transaction, Michael Dell, who owns approximately 14% of Dell’s shares, will continue to lead the company as 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. Dell will continue to be headquartered in Round Rock, Texas.
The move makes sense. Dell lost nearly a third of its value last year as the epicentre of computing moved from Dell’s traditional strengths of PCs and servers to the mobile market. Michael Dell famously started the company in his university dorm room with $1000 in 1984, shaking up the existing PC market with a low cost direct sales model that turned the company into a hardware powerhouse in the 1990s.
The time would seem to be right – it would enable Dell to make technology investments and adopt strategies that not be affected by the tyranny of watching the stock price and quarterly earnings figures.
