Dell to go private in landmark $24.4 billion deal

Tue Feb 5, 2013 8:00pm EST
 
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By Poornima Gupta and Nadia Damouni and Greg Roumeliotis

SAN FRANCISCO/NEW YORK (Reuters) - Michael Dell struck a deal to take Dell Inc private for $24.4 billion in the biggest leveraged buyout since the financial crisis, partnering with the Silver Lake private equity firm and Microsoft Corp to try to turn around the struggling computer company without Wall Street scrutiny.

The deal, which requires approval from a majority of shareholders excluding Dell himself, would end a 24-year run on public markets for a company that was conceived in a college dorm room and quickly rose to the top of the global personal computer business - only to be rendered an also-ran over the past decade as PC prices crumbled and customers moved to tablets and smartphones.

Dell executives said on Tuesday that the company will stick to a strategy of expanding its software and services offerings for large companies, with the goal of becoming a full-service provider of corporate computing services in the mold of the highly profitable IBM. They played down speculation that Dell might spin off the low-margin PC business on which it made its name.

Dell did not give specifics on what it would do differently as a private entity, angering some shareholders who said they needed more information to determine whether the $13.65-a-share deal price - a 25 percent premium over Dell's stock price before buyout talks leaked in January - was adequate.

"This feels like the ultimate insider trade. Why weren't the plans and projections that Michael Dell has going forward been shared with me and other shareholders?" said Frederick "Shad" Rowe, general partner of Greenbrier Partners and a trustee of the $22 billion Texas Employees Retirement System. Rowe said he dumped about 400,000 shares of Dell on Tuesday, adding, "I was so irritated I didn't want to think about it anymore.

Dell spokesman David Frink said the board had conducted an extensive review of strategic options before agreeing to the buyout to ensure that the best interests of all stockholders were served.

Although Dell shares were trading at more than $18 a year ago, many analysts said they believed the majority of shareholders will accept the buyout because of pessimism over the growth prospects of the PC business.

"A private Dell is likely to more aggressively cut costs, in our view. But we think merely restructuring only postpones the inevitable, creating a value trap," said Discern Inc analyst Cindy Shaw. "Dell needs to do more than reduce its cost structure. It needs to innovate."   Continued...

 
Dell founder and CEO Michael Dell displays a Dell tablet computer during his keynote address at Oracle Open World in San Francisco, California in this September 22, 2010 file photograph. REUTERS/Robert Galbraith/Files