Dell has announced it has signed a definitive merger agreement under which Michael Dell, Dell's Founder, Chairman and Chief Executive Officer, in partnership with global technology investment firm Silver Lake, will acquire Dell.
Under the terms of the agreement, Dell stockholders will receive US$13.65 in cash for each share of Dell common stock they hold, in a transaction valued at approximately US$24.4 billion. The price represents a premium of 25% over Dell's closing share price of US$10.88 on January 11, 2013, the last trading day before rumors of a possible going-private transaction were first published; a premium of approximately 35% over Dell's enterprise value as of January 11, 2013; and a premium of approximately 37% over the average closing share price during the previous 90 calendar days ending January 11, 2013. The buyers will acquire for cash all of the outstanding shares of Dell not held by Michael Dell and certain other members of management.
The Dell Board of Directors acting on the recommendation of a special committee of independent directors unanimously approved a merger agreement under which Michael Dell and Silver Lake Partners will acquire Dell and take the company private subject to a number of conditions, including a vote of the unaffiliated stockholders. Michael Dell recused himself from all Board discussions and from the Board vote regarding the transaction.
A Special Committee was formed after Micheal Dell first approached Dell's Board of Directors in August 2012 with an interest in taking the company private. Led by Lead Director Alex Mandl, the Special Committee retained independent financial and legal advisors JP Morgan and Debevoise & Plimpton LLP to advise the Special Committee with respect to its consideration of strategic alternatives, the acquisition proposal and the subsequent negotiation of the merger agreement.
The Special Committee also engaged a leading management consulting firm to conduct an independent analysis, including a review of strategic alternatives for Dell and opportunities for the company as a public entity, and thereafter engaged Evercore Partners.
The merger agreement provides for a so-called "go-shop" period, during which the Special Committee – with the assistance of Evercore Partners – will actively solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals. The initial go-shop period is 45 days. Following that period, the Special Committee will be permitted to continue discussions and enter into or recommend a transaction with any person or group that submitted a qualifying proposal during the 45-day period. A successful competing bidder who makes a qualifying proposal during the initial go-shop period would bear a US$180 million (less than 1%) termination fee. For a competing bidder who did not qualify during the initial go-shop period, the termination fee would be US$450 million.
Mr Mandl, lead director of Dell's Board of Directors, said: "The Special Committee and its advisors conducted a disciplined and independent process intended to ensure the best outcome for shareholders. Importantly, the go-shop process provides a real opportunity to determine if there are alternatives superior to the present offer from Mr. Dell and Silver Lake."
Michael Dell said: "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."
"Michael Dell is a true visionary and one of the preeminent leaders of the global technology industry," said Egon Durban, a Silver Lake Managing Partner. "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."
Following completion of the transaction, Michael Dell, who owns approximately 14% of Dell's common shares, will continue to lead the company as Chairman and Chief Executive Officer and will maintain a significant equity investment in Dell by contributing his shares of Dell to the new company, as well as making a substantial additional cash investment. Dell will continue to be headquartered in Round Rock, Texas.
The transaction will be financed through a combination of cash and equity contributed by Michael Dell, cash funded by investment funds affiliated with Silver Lake, cash invested by MSD Capital, LP, a US$2 billion loan from Microsoft, rollover of existing debt, as well as debt financing that has been committed by BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets (in alphabetical order), and cash on hand. There is no financing condition.
The transaction is subject to other customary conditions, including receipt of required regulatory approvals, in addition to the Dell stockholder approvals described above. The transaction is expected to close before the end of the second quarter of Dell's fiscal year 2014.
