Done Deal: Dell Going Private In $24.4B Buyout


Dell has reached an agreement with private equity firm Silver Lake Partners and other financing companies to go private through a leveraged buyout at $13.65 per share, or $24.4 billion, according to the company.

The much-anticipated move ends weeks of speculation about the deal and should allow Dell to focus more on technology and building enterprise solutions without having to worry about satisfying Wall Street's thirst for quarterly profits, according to solution providers and other executives.

Greg Davis, vice president and general manager of Dell's Global Commercial Channel Business, was traveling Tuesday but offered a statement to solution providers on business going forward. "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," Davis said in an e-mail to CRN.

[Related: Dell Go Private? History, Research Say It Could Be Good For Everyone Involved ]

Dell CEO Michael Dell, meanwhile, said in a statement: "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.

"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," he said.

Michael Dell will continue to lead the company after the leveraged buyout, which includes cash from Silver Lake, MSD Capital, a $2 billion loan from Microsoft and additional financing from BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets. Michael Dell also will contribute his own shares to the new company, believed to be about 16 percent of the total shares, as well as make "a substantial additional cash investment," according to the company.

"Michael Dell is a true visionary and one of the pre-eminent leaders of the global technology industry," said Egon Durban, a Silver Lake managing partner, in a statement. "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."

The idea of going private was first brought to Dell's board of directors in August 2012 by Michael Dell, according to the company. A special committee conducted an independent analysis, including a review of strategic opportunities for the company to remain public.

Dell shares closed Monday at $13.27 in anticipation of a buyout. The company's stock has increased significantly since the rumored buyout was first reported, having closed Dec. 31, 2012, at $10.14 per share. Dell had been among the worst technology stocks during 2012, with shares falling more than 30 percent in the last calendar year.

Peter Estes, co-founder and president of Portsmouth, N.H.-based Axis Business Solutions, said the benefits of Dell's privatization should trickle down to 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," Estes said in an email to CRN.

Dell has long felt that it has been regarded as "a PC company" by Wall Street, a view it has vigorously sought to shed through numerous acquisitions over the past couple of years. In some cases, Dell, Round Rock, Texas, has successfully integrated those companies, while others haven't been fully assimilated into Dell's enterprise solutions approach, said solution providers. The leveraged buyout should accelerate that transformation, said Estes.

"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."

While a leveraged buyout of Dell was not surprising to many VARs, Microsoft's inclusion as a financing partner.

Michael Goldstein, CEO of LAN Infotech, a Fort Lauderdale, Fla.-based VAR, said that close of a relationship between two of his biggest vendors is a little scary.

"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," Goldstein said.

STEVEN BURKE and ROBERT WRIGHT contributed to this story.

PUBLISHED FEB. 5, 2013