Michael Dell and his investment firm are ponying up $750 million in cash toward the $24.4 billion purchase of Dell Inc to help bankroll the largest private equity-backed buyout since the financial crisis.<\/p>\n
The Dell founder and CEO this week struck a deal to take private the company he created out of a college dorm room in 1984, partnering with private equity house Silver Lake and Microsoft Corp.<\/p>\n
Michael Dell will contribute $500 million of his own cash, and MSDC Management – an affiliate of his investment vehicle, MSD Capital – will contribute another $250 million, according to a company filing on Wednesday.<\/p>\n
Dell Inc also said it is targeting the repatriation of $7.4 billion of cash now parked abroad to help finance the deal. That may dismay some shareholders, as a hefty tax is usually levied on cash brought back from overseas.<\/p>\n
The deal, which ends Dell’s rocky 24-year run on the Nasdaq just as the once-dominant PC maker struggles to revive growth, is contingent on approval by a majority of shareholders — excluding Michael Dell himself.<\/p>\n
Several shareholders, including prominent investor Frederick “Shad” Rowe of Greenbrier Partners, have spoken out against the deal, protesting a lack of specifics as well as a potential conflict of interest with Michael Dell being the company’s single largest shareholder with a roughly 16 percent stake.<\/p>\n
“Some shareholders are glad. But there are others who feel it’s a raw deal,” said Shaw Wu, an analyst with Sterne Agee, who has spoken with several Dell shareholders since the announcement but declined to provide further details.<\/p>\n
Dell was regarded as a model of innovation as recently as the early 2000s, pioneering online ordering of custom PCs and working closely with Asian suppliers and manufacturers to assure rock-bottom production costs. But it missed the big industry shift to tablet computers, smartphones and high-powered consumer electronics such as music players and gaming consoles.<\/p>\n
Executives said on Tuesday the company will stick to a strategy of expanding its software and services offerings for large companies, with the goal of becoming a provider of corporate computing services – like the highly profitable IBM. They played down speculation the company may spin off the low-margin PC business on which it made its name.<\/p>\n
The company has not given many specifics on what it would do differently as a private entity, angering some shareholders who said they needed more information to determine whether the $13.65-a-share deal price – a 25 percent premium to Dell’s stock price before buyout talks leaked in January – was adequate.<\/p>\n
On Wednesday, an individual shareholder filed the first lawsuit, in Delaware, attempting to stop the buyout. The lawsuit – which is seeking class-action status – maintains that the $13.65 per share offered sharply underestimated the company’s long-term prospects.<\/p>\n
“By engaging in the going private transaction now – in the midst of the company’s transition from a PC vendor to full service software and enterprise solution provider – the board is allowing defendants M. Dell and Silver Lake to obtain Dell on the cheap,” read the lawsuit filed by Catherine Christner.<\/p>\n
Dell, the world’s No. 3 personal computer maker, broke down details of the equity and debt financing secured for the buyout in Wednesday’s filing.<\/p>\n
Silver Lake is putting up $1.4 billion, while banks including Bank of America, Barclays, Credit Suisse and RBC will provide roughly $16 billion in term loans and other forms of financing.<\/p>\n
Wednesday’s filing also disclosed that under certain circumstances if the merger cannot be completed, Michael Dell and Silver Lake could have to pay a termination fee of up to $750 million to the company.<\/p>\n
Restoring Dell to its former glory<\/strong><\/a><\/p>\n