Silver Lake To Acquire Dell for $24.3 Billion, Taking the Company Private

Private equity firm Silver Lake Partners announced Tuesday morning that it has agreed to acquire Dell Inc. in a deal the company values at approximately $24.3 billion.

Under the terms of the deal, Silver Lake is acquiring Dell's stock for $13.65 per share in cash -- a 25 percent premium over the value of its stock on Jan. 11 when rumors of a deal first surfaced. Founder and CEO Michael Dell will retain a controlling interest in the company that bears his name based on his contribution of cash and stock.

Also financing the deal Dell's longtime partner Microsoft, which is providing a $2 billion loan and investments from MSD Capital LP. In addition to a rollover of existing debt, Bank of America Merrill Lynch, Barclays, Credit Suisse and RBC Capital markets are providing additional debt financing, the company announced.

Dell announced a go-shop period of 45 days that would allow shareholders to entertain better offers without a prohibitive breakup fee ($180 million). While analysts reportedly expect the deal to close, it remains to be seen whether shareholders challenge it.

By taking the company private, Dell hopes to accelerate growth without the scrutiny of the public markets. "Dell has made solid progress executing this strategy over the past four years, but we recognize that it will still take more time, investment and patience, and I believe our efforts will be better supported by partnering with Silver Lake in our shared vision," Michael Dell said in a statement. "I am committed to this journey and I have put a substantial amount of my own capital at risk together with Silver Lake, a world-class investor with an outstanding reputation. We are committed to delivering an unmatched customer experience and excited to pursue the path ahead."

The deal ranks among the largest IT-oriented acquisitions over the past decade or so, rivaled only by Hewlett-Packard's $25 billion buyout of Compaq 12 years ago. Recent megadeals were more modest, including Oracle's 2010 acquisition of Sun Microsystems for $7.4 billion, Google's $12.5 billion acquisition of Motorola Mobility last year, and HP's widely criticized moves to acquire Autonomy in 2011 for $10.3 billion and EDS in 2008 for $8 billion.

It's also the largest leveraged buyout of a public company since the financial crisis hit in 2007 when Blackstone Group took Hilton Hotels private in a transaction valued at $26 billion.

About the Author

Jeffrey Schwartz is editor of Redmond magazine and also covers cloud computing for Virtualization Review's Cloud Report. In addition, he writes the Channeling the Cloud column for Redmond Channel Partner. Follow him on Twitter @JeffreySchwartz.

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Reader Comments:

Wed, Feb 6, 2013 Colorado

There may be some room for discussion. Going private may not be all bad. By going public in the first place, the bottom line has changed from quality and service to dividends and stock value. The push to get bigger and release more products faster comes at the expense of quality and customer service. I have been a Dell shop for over 20 years and their service tanked in the last couple of years. Bad parts happen.with any company. I have had bad monitors, bad keyboards, bad motherboards etc. in the past, but they always came through with fixes and extensions of warranties to keep me satisfied with their product - that is until these last 2 years. Now, they have 3 tiers of service where the first 2 appear to read from a script. Dell then took away the service department's ability to cut through the red tape and made technicians repeat steps for each machine when they already know what the issue is. That may be OK for a mom or pop store with one or two machines, but not for a business environment with multiple machines. Maybe now they can go back to better service and focus on gaining back customer loyalty.

Tue, Feb 5, 2013 ITtechTyoe Turn around and open your eyes

"By taking the company private, Dell hopes to accelerate growth without the scrutiny of the public markets" This statement is bad... really bad. It usually means they plan to take the company in the direction of a sweat shop. I worked at HP at the time of the Compaq merger and HP because more like a sweat than a technology company. Whenever a company wants to advoid scrutiny it is never in the best interest of the employees or customer. It is always for greed and profit. Expect the quality of Dell products to hit rock bottom as jobs are outsourced and what few facilities remain in American become labor camps.

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