Dell Inc. announced it has signed a definitive merger agreement under which it will be acquired by Michael Dell, Dell’s founder, chairman and CEO, in partnership with global technology investment firm Silver Lake.
The transaction - which is is expected to close before the end of the second quarter of Dell’s FY2014 - will be financed through a combination of cash and equity contributed by Michael Dell, cash funded by investment funds affiliated with Silver Lake, cash invested by MSD Capital, L.P., a $2 billion loan from Microsoft, rollover of existing debt, as well as debt financing that has been committed by BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets, and cash on hand.
Under the terms of the agreement, Dell stockholders will receive $13.65 in cash for each share of Dell common stock they hold, in a transaction valued at approximately $24.4 billion. 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; a premium of approximately 35% over Dell’s enterprise value as of Jan. 11, 2013; and a premium of approximately 37% over the average closing share price during the previous 90 calendar days ending Jan. 11, 2013. The buyers will acquire for cash all of the outstanding shares of Dell not held by Michael Dell and certain other members of management.
A special committee was formed after Michael Dell first approached Dell’s board of directors in August 2012 about 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 to advise the committee with respect to its consideration of strategic alternatives, the acquisition proposal and the subsequent negotiation of the merger agreement.
The Dell board of directors acting on the recommendation of a special committee of independent directors unanimously approved the merger agreement.
The merger agreement also provides for 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. The initial go-shop period is 45 days.
“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,” said Michael Dell, in a statement released by the company. “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 SilverLake 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 SilverLake, 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, Michael Dell, who owns approximately 14% of Dell’s common shares, will continue to lead the company as chairman and chief executive officer and will 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.