Dell Inc. (NASDAQ:DELL) said it finally entered an agreement with its CEO Michael Dell, private equity firms, Silver Lake Partners and MSD Capital to take the company private for $13.65 per share or $24.4 billion , which is considered a leverage buy-out, after the financial crisis.
The price of the LBO represents a 25% premium over the closing price of Dell’s stock at $10.88 per share on January 11, when the proposed deal was reported.
The funds for the agreement will come from a combination of debt and equity including a $2 billion loan from Microsoft Corporation (NASDAQ:MSFT) and equity financing from Michael Dell, who own 14 percent stake in the company; a rollover of the company’s existing ~9 billion debt, and debt financing.
According to Dell Inc. (NASDAQ:DELL), the private equity firm and other entities agreed to acquire all the outstanding shares of the company excluding the 14% stake held by its CEO and other members of the management team. Michael Dell’s stake in the company is approximately $3.4 billion, based on the transaction.
The board of directors of the company created a special committee responsible for evaluating strategic alternatives with its banking partners during the 45-day go-shop period, wherein the company could solicit and receive alternative bids. If the company cancels the deal during the go shop period, the buyout group is entitled to receive $180 million termination fee. In addition, there is a break-up fee of $450 million for bidders who did not qualify during the initial go-shop period.
In a statement, 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.”
According to Microsoft Corporation (NASDAQ:MSFT), its participation in the LBO is part of its commitment to the long-term success of the entire PC ecosystem. It invests heavily in different ways to build the PC ecosystem for the future.
According to Egon Durban, managing partner of Silver Lake, “Michael Dell is a true visionary and one of the preeminent leaders of the global technology industry.”
The transaction is expected to close by the end of July. Michael Dell will remain chairman and CEO of the company when the company becomes private.
Analysts at Stifel research firm believed the deal will close as planned and has a $14 target price for the shares of the company, they also recommended a hold rating. In a research note, the analysts emphasized that they are interested in Dell Inc. (NASDAQ:DELL)’s ability to expand its Dell-owned software contributions over the coming years.