updated 10:10 pm EST, Mon February 4, 2013
Leveraged deal to take Dell private worth up to $24 billion
According to sources familiar with the matter, Dell's board of directors is planning to meet tonight to vote on an offer to take the company private. The offer, valued at $24 billion, would make the deal the largest leveraged buyout in five years. As reported, Silver Lake Management LLC will invest more than $1 billion in the deal, and Microsoft is injecting $2 billion. CEO Michael Dell will include his 15.7 percent share of the business, and an additional $700 million, giving him a majority stake in the company.
Dell's board of directors includes Ross Perot Jr., American Airlines CEO Don Carty, and President and CEO of Adobe Systems Shantanu Narayet. If the board approves the deal, it could be announced as soon as tonight, but a Tuesday announcement would be more likely. In addition to the board vote, the majority of the shareholders would have to approve the deal as well.
Potential complications with completing the deal include the involvement of Michael Dell. His involvement in the deal could be seen as stock price manipulation, and may be viewed as a conflict of interest which could induce some additional scrutiny by regulatory agencies.
"Dell beautifully aligned their entire model to fit a particular world," said Jan Rivkin, a professor at Harvard Business School. "When that world changed, they found it very hard to alter the model." Dell continues its shift away from retail sales, into a service and support-oriented company with some success. The combination of persistent economic struggles worldwide with a changing market has reduced Dell's market capitalization from $100 billion to approximately $23 billion today.
Bond analyst Stanley Martinez at Legal and General believes that "the timing and the valuation could be exceptionally clever" for a buyout attempt, given Dell's depressed stock price. The stock has dropped nearly 39 percent over the last five years. Dell's stock is up in after-hours trading by less than one percent to $13.35 but still down on the day's opening of $13.59 per share.