Dell Goes Private in $24.4B Deal
Dell Goes Private in $24.4B Deal by UCStrategies Staff
Silver Lake Partners and Dell have reached an agreement with regard to the question of going private through a leveraged buyout. In addition to Dell and the private equity firm Silver Lake, other financing companies have also been involved in the deal. The leverage buyout stands at $13.65 per share or $24.4 billion, according to Dell.
Dell is now able to concentrate on technology and the development of enterprise solutions. According to solution providers and other executives, it also does not have the added pressure of Wall Street’s insistence that the company make quarterly profits.
The vice president and general manager of Dell’s Global Commercial Channel Business, Greg Davis, commented on the business moving forward, stating: “As Dell enters this exciting new chapter, our commitment to channel partners does not waver. As a private enterprise, we will continue to execute our strategy of delivering best-in-class solutions and growing our channel relationships.”
The CEO of Dell, Michael Dell, stated: “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.”
He continued: “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. 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 company will continue to be led by Michael Dell following the leveraged buyout, and this includes Silver Lake MSD Capital cash, a loan from Microsoft totalling $2 billion, and further fiscal assistance from BofA, Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets. Shares (at 16 percent of the total shares) will also be contributed by Michael Dell, who is making “a substantial additional cash investment.”
A Silver Lake managing partner, Egon Durban, stated: “Michael Dell is a true visionary and one of the pre-eminent leaders of the global technology industry. Silver Lake is looking forward to partnering with him, the talented management team at Dell and the investor group to innovate, invest in long-term growth initiatives and accelerate the company's transformation strategy to become an integrated and diversified global IT solutions provider.”
Michael Dell first proposed the notion for Dell to go private in August 2012; thereafter, a committee made an independent analysis of strategic opportunities in the case that the company remained public.
In anticipation of the buyout, Dell closed Monday at $13.27, and since rumours of the buyout first started to spread, stock has increased substantially; on Dec 31, 2012, the company closed at $10.14 per share. Last year, it was suggested that Dell had among the worst technology stocks, and shares declined by over 30 percent in 2012.
The co-founder and president of Portsmouth, New Hampshire-based Axis Business Solutions, Peter Estes, commented on the advantages of Dell’s privatisation for his business: “[It] would, in turn, serve to increase our ability to deliver effective cost-saving services to our customers. If going private allows Dell to introduce more strategic offerings, they will continue to rely on strategic regional partners like Axis to design and deploy these solutions.”
Although Dell has often been considered as “a PC company” by Wall Street, acquisitions over the years and the leveraged buyout should support the company’s transition. Estes said: “We have felt that being a publicly held company has been an imposition to Dell's efforts to make this adjustment quickly and forced them to have a short-term quarterly focus on revenue," Estes said. "As a private company they would no longer need to be hyper-focused on quarterly earnings, enabling them to take the long-term focus necessary to continue to retool as an enterprise-focused provider.”
Many VARs were expecting the leveraged buyout, and more were surprised that Microsoft was included as a financing partner. The CEO of a Fort Lauderdale, Florida-based LAN Infotech, Michael Goldstein, stated that the Microsoft-Dell relationship is quite intimidating: “I don't think they're going to merge tomorrow, but it's a possibility down the road. Dell is Microsoft's biggest reseller partner. They're hugely important. Seeing the two of them combined makes me a little nervous because we're a smaller solution provider and we don't want to get lost in the mix if it does happen.” (CY) Link