Dell Inc. (NASDAQ:DELL) is all set to enter into an agreement to sell itself to a buyout syndicate led by its founder and Chief Executive, Michael Dell, and private equity firm, Silver Lake partners. Most probably, the deal will be announced on Monday.
In the deal, majority ownership will go to founder Michael dell (who owns a 16 percent stake in the company), Silver Lake Resources Limited (ASX:SLR), and Microsoft Corporation (NASDAQ:MSFT) will become minority investors, according to a source familiar with the matter. Dell is the World’s third largest personal computer maker, having a market value of $23 billion.
There was no information about the price the group has agreed to pay for its stake in Dell, but this deal will be the largest leveraged buyout since the global financial crisis.
Though the deal is set to be closed by the next weekend, the buyout group is working on every minute detail, and this may lead to further delay in the process.
According to our sources, the investment group, which held talks with the Dell Inc. (NASDAQ:DELL) group in New York, has secured up to $15 billion debt financing to take Dell private from four investment bank—Barclays PLC (LON:BARC) (NYSE:BCS), Bank of America Corp (NYSE:BAC) Merrill Lynch, Credit Suisse Group AG (NYSE:CS) and RBC Capitalsoft.
Dell has hired Evercore Partners Inc and formed a special committee of its independent directors to find out whether the company is striking the best deal for its shareholders, which is only in the best interest of Michael Dell. In the deal, Microsoft Corporation (NASDAQ:MSFT) will probably contribute around $2 billion in capital to back the $24 billion takeover.
PE giant Silver Lake is believed to have lined up a cadre of bankers, including Bank of America, to provide some $15 billion in financing.
There are expectations that Microsoft will have a larger role in the Dell’s operation rather than just being a source of funding for the dell buyout. Dell will be benefit from the takeover, as it will be able to carry on its difficult makeover, away from public scrutiny.
Michael Dell may even contribute $500 million – $1 billion of his personal wealth into the proposed buyout, over and above his 15.7 percent ownership stake in the company, to gain a majority control of the company.
Tech industry analyst, Patrick Moorhead, with Moor Insights & Strategy said “It reinforces the point of view that Michael thinks the company is worth a heck of a lot more on a private basis than on a public basis,” Moorhead said. “Nothing beats having the owner put his own personal assets on the line. If Michael is putting more money on the table, we absolutely are getting closer to a (completed) deal.”
Michael Dell founded the company in his college dorm room in 1984. After the sluggish sales in 2007, Michael retook the CEO Job. The PC maker has been following a restructuring plan after losing the bulk of its market share to rival with more impressive devices. As a part of the turnaround plan, the company has been expanding into new markets, acquiring storage, services and software makers to diversify away from the low-profit PCs, which make up the majority of the company’s sales.
The spokespersons of Dell Inc. (NASDAQ:DELL), Microsoft Corporation (NASDAQ:MSFT) and Barclays PLC (LON:BARC) (NYSE:BCS) refused to comment and representatives of Silver Lake and Perelle Weinberg were not available for the comment.