Michael Dell founded his namesake company in 1984 out of his University of Texas dorm-room. In 1988, Dell Computer Corporation went public, which has remained its status until now.
In a move that had been speculated on for weeks, Dell today announced that the company is going private. Michael Dell himself is taking the lead buying back the company from public shareholders. Dell is joined by private equity firm Silver Lake and is also receiving a $2 billion loan from Microsoft to help finance the proposed transaction.
The deal is priced at $13.65 per share, which gives Dell a valuation of $24.4 billion. Dell’s closing price on January 11st was $10.88, when rumors first surfaced about the company going private. Dell disclosed today that it formed a special committed in August of 2012 to examine and evaluate the possibility of taking Dell private. Dell’s second quarter fiscal 2012, which was reported in August, showed the company being impacted by a PC sales slump.
“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.”
Under terms of the current deal Michael Dell will continue as CEO and Chairman of the company and no change is expected in the company’s head office location either.
Today’s deal is by no means complete or final.
The deal includes what Dell has referred to as a ‘go-shop’ period in which other offers may be put forward. The ‘go-shop’ period will last 45 days, during which a special committee assembled by Dell will evaluate other offers. Those that attempt to bid during the ‘go-shop’ period will be challenged by a number of potential costs. Competing bidders that don’t end up qualifying during the go-shop period will be hit with a $450 million termination fee.
“The Special Committee and its advisors conducted a disciplined and independent process intended to ensure the best outcome for shareholders,” Alex Mandl, lead director of Dell’s Board of Directors, said in a statement. “Importantly, the go-shop process provides a real opportunity to determine if there are alternatives superior to the present offer from Mr. Dell and Silver Lake.”
The final deal is expected by Dell to close before the end of Dell second quarter for fiscal 2014.
Silver Lake, which is taking the lead in bringing Dell private, is no stranger to the market. Silver Lake was instrumental in taking communication vendor Avaya private for $8.2 billion back in 2007.