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“Big Texas” Tech Giant Dell Goes Private for $24.4 Billion

This morning, Dell finally made the announcement that the tech community has been waiting for with baited breath…they have signed an agreement to be acquired via partnership by Founder Michael Dell and global investment firm Silver Lake for $24.4 billion.

I figured this news would be arriving soon, but not last week. Of course last week was dominated by the BlackBerry 10 launch and the upcoming Super Bowl (and the commercials and Beyonce’s halftime performance)…now who would want to compete with that? Even Dell knows its limitations it seems!

Getting down to the business of this deal, Dell said that it signed the definitive merger agreement under with Michael Dell, who is also the company’s Chairman and CEO, and investment firm Silver Lake will purchase the PC-maker for $24.4 billion. In addition, the agreement calls for Dell stockholders to receive $13.65 in cash for each share of Dell common stock. The price represents a premium of 25 percent over Dell’s closing share price of $10.88 on Jan. 11, 2013, the last trading day before rumors of a possible going-private transaction were first published.

According to Dell, the buyers will acquire for cash all of the outstanding shares of Dell not held by Michael Dell and certain other members of management.

This transaction, at least it seems to the SMB world, has been about a year in the making. Things began to move around at Dell when the company, over a period of a few months acquired three separate players in the SMB world: AppAssure, Quest Software and Wyse Technologies. I thought that Dell was possibly doing this to maybe shed its branded image as a “non-channel friendly” organization, but of course there was more to the agenda it seemed…or at least that it what I am purely speculating.

This past summer, a Special Committee was formed after Michael Dell first approached his Board with an interest in taking the company private. Led by Lead Director Alex Mandl, the Special Committee retained independent financial and legal advisors J.P. Morgan and Debevoise & Plimpton LLP were appointed to advise the Special Committee with respect to its consideration of strategic alternatives, the acquisition proposal and the subsequent negotiation of the merger agreement.

The Special Committee also engaged a leading management consulting firm to conduct an independent analysis, including a review of strategic alternatives for Dell and opportunities for the company as a public entity, and thereafter engaged Evercore Partners.

The agreement, which also has Microsoft kicking in around $2 million for its stake, includes a “go-shop” period, during which the Special Committee – with the assistance of Evercore Partners – will actively solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals within the next 45 days. This means that a successful competing bidder who makes a qualifying proposal during the initial go-shop period would bear a $180 million (less than 1 percent) termination fee. For a competing bidder who did not qualify during the initial go-shop period, the termination fee would be $450 million.

“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,” Michael Dell said today in a media statement. “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.”

Following completion of the transaction, Mr. Dell, who owns approximately 14 percent of Dell’s common shares, will continue to lead the company as Chairman and CEO. He will still maintain a significant equity investment in Dell by contributing his shares of Dell to the new company, as well as making a substantial additional cash investment. Dell will continue to be headquartered in Round Rock, Texas.

If all goes well, and no one else approaches Dell successfully within the 45-day “go shop” period, the transaction is set to close before Q2 of Dell’s fiscal 2014.

Regardless of what happens, it will be interesting (to say the least) to see how this plays out. Will Dell join its competitors, and possibly focus more on the Cloud and software, and exit the PC business???

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Sunday, 26 May 2019