Dell only a mouse-click away from $24bn LBO

Michael Dell is about to make a serious play for the company he founded back in 1984. The buy-out would value the world's number three PC maker at $24bn.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013

Computer maker Dell, which has been listed since June 1988, could be taken private once again by its founder and chief executive more than two decades later. Michael Dell, alongside private equity firm Silver Lake Partners, is leading a consortium of investors in a deal which would offer $14 a share for all of Dell’s outstanding stock.
If the offer is accepted, the deal - one of the largest leveraged buy-outs of all time - could go through as early as next week. But negotiations are still at a very iffy stage. While the price offered by Dell and his buy-out band marks a significant premium on Dell’s share price before news of a potential buyout surfaced back in January, it still falls short of Dell’s 52-week high of $18.36.

Dell is not only keeping his 16% stake in the deal, he might put a further portion of his personal fortune in the deal. Why is he so keen to get his company back? In a word, control. Dell has been gradually losing market share to the likes of Apple, and has failed to keep pace with the burgeoning tablet market. And, despite several expensive acquisitions, Dell has yet to launch its promised enterprise software product.  

Dell must have come up with a fairly convincing turnaround strategy, should he regain control of the company. He’s managed to convince Microsoft to join the consortium as a minority investor (£2bn is the figure being bandied about). Microsoft has a vested interest in the fate of Dell, admittedly, as the computer manufacturer is one of Windows-maker’s biggest customers, and is especially key to the lucrative enterprise market. But Barclays, Credit Suisse, Royal Bank of Canada, and Bank of America have all joined forces to provide debt financing for the deal too. 

If Dell succeeds in pulling off the leveraged buy-out, and manages to get his company back on track, it will echo a move pulled by the late Steve Jobs back in the late nineties. Jobs is credited with being the salvation of Apple, introducing the Macbook, iPod, iPhone and iPad during his tenure as CEO. Ironically, before Jobs returned, Dell was quoted as saying that Apple should shut up shop and 'give the money back to the shareholders'. It would also be a remarkable display of energy by the entrepreneur, who revitalised the PC market last time it was ailing with his 'mass customisation' model. He's been the darling of many an MBA syllabus ever since.

Of course, Jobs was invited back. Dell is inviting himself. And a special committee has been set up to decide whether the buy-out really is the best thing for the future of the company. Minority investors fear that Dell’s history with the company and substantial equity stake could see them lose any say in the running of the company henceforth. Tricky.

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