Michael Dell takes computer company he founded private following $24bn deal
Tuesday 05 February 2013
Michael Dell has agreed a $24.4bn (£15.5bn) deal to take the computer company he founded almost 30 years ago private – ending weeks of speculation about its future.
The technology entrepreneur has joined forces with Microsoft and the private equity firm Silver Lake in the biggest leveraged buyout since the financial crisis.
The deal will be financed by cash from Silver Lake and Mr Dell's MSD Capital – which employs 80 people in three cities to invest his near $16bn fortune – as well as a $2bn loan from Microsoft and debt financing from banks including Barclays and Credit Suisse.
Mr Dell and his fellow investors are paying $13.65 per share for the computer maker – a 24 per cent premium to the $11 Dell shares were trading at before news of the deal talks broke in January.
The offer is significantly below last year's peak share price of $17.61.
"This transaction will open an exciting new chapter for Dell, our customers and team members," Mr Dell said.
"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 struggled to adapt to a changing market place in recent years as consumers switch to smartphones and tablets . The company has also ceded market share in the PC market.
Mr Dell started the company in his University of Texas dorm room in 1984 with just $1,000, building computers to sell to his fellow students. Eight years later, still in his late twenties, he became the youngest-ever chief executive of a Fortune 500 company.
When Steve Jobs returned to Apple in 1997, Mr Dell famously suggested he'd be best off shutting down the company and returning the cash to shareholders.
However, nine years later, Mr Jobs had the last laugh when Apple's market value surpassed Dell's. These days, Apple is trading at more than 20 times the value of Dell.
"This is an opportunity for Michael Dell to be a little more flexible managing the company," said FBN Securities analyst Shebly Seyrafi. "That doesn't take away from the fact they will have challenges in the PC market like they did before."
The news is by no means the first time the company has undergone a major change at the top.
Mr Dell handed over the reins of the business to long-time lieutenant Kevin Rollins in 2004.
However, sales and customer service slipped during his three years in charge, meaning that most investors were relieved when Mr Dell re-took control again in January 2007.
However, in the six years since this, the company's market share price has dipped even further, as has its reputation.
Analysts say that much will hinge on the willingness of future partners to support his potentially costly turnaround effort.
"This gives him flexibility. The market wasn't valuing the company at where he thinks it should be worth and who knows that better than him," Phil Silverman, managing partner at Kingsview Capital said.
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