Slumping personal computer maker Dell is going private in a $24.4 billion buyout that represents the largest deal of its kind since the Great Recession dried up the financing for such risky maneuvers.
The complex agreement announced Tuesday will allow Dell's management, including founder Michael Dell, to attempt a company turnaround away from the financial pressures of Wall Street.Dell's decision to move forward with the buyout reflects the tough times facing the personal computer industry as more technology spending flows toward smartphones and tablet computers. PC sales fell 3.5 percent last year, according to the research group Gartner Inc., the first annual decline in more than a decade. Tablet computers are expected to outsell laptops this year.The shift has also weakened fellow PC maker Hewlett-Packard, chip maker Intel and software giant Microsoft.Dell stockholders will be paid $13.65 per share to leave the Round Rock-based company on its own. That's 25 percent more than the stock's price of $10.88 before word of the buyout talks trickled out three weeks ago. But it's a steep markdown from the share price of $24 six years ago when Michael Dell returned for a second go-round as CEO.Dell shares rose 14 cents to $13.41 in afternoon trading, indicating that investors don't believe a better offer is likely. The chances of a successful counter offer look slim, given the forces lined up behind the current deal.Michael Dell, the company's largest shareholder who started selling computers out of his University of Texas dorm room, is throwing in his 14 percent stake and an undisclosed sliver of his $16 billion fortune to help finance the sale to a group led by the investment firm Silver Lake."We recognize that [transformation] 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.Microsoft, which counts Dell among its biggest customers, is lending $2 billion to the buyers. The remaining money to pay for the acquisition is being borrowed through loans arranged by several banks, saddling Dell with an estimated $15 billion in debt that could raise doubts about its financial stability among its risk-averse corporate customers.The sale is structured as a leveraged buyout, which requires the acquired company to repay the debt taken on to finance the deal.Dell's sale is the second highest-priced leveraged buyout of a technology company, trailing the $27 billion paid for First Data Corp. in 2007.Michael Dell, 47, is betting that his company will be able to evolve into a more diversified seller of technology services, business software and high-end computers without having to pander to the stock market's fixation on whether earnings are growing from one quarter to the next. In 2009, Dell spent $3.9 billion to acquire Plano-based Perot Systems to expand into the business and government systems services arena, following Hewlett-Packard's acquisition of EDS.Have more to add? News tip? Tell us
