Dell has signed an agreement under which Michael Dell, Dell’s Founder, Chairman and Chief Executive Officer, in partnership with Silver Lake, will acquire Dell in a transaction valued at approximately $24.4 billion. The transaction is expected to close before the end of the second quarter of Dell’s FY2014.
Following completion of the transaction, Mr. Dell, who owns approximately 14 percent 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 is a multinational computer technology corporation that develops, sells, repairs and supports computers and related products and services. The company sells personal computers, servers, data storage devices, network switches, software, and computer peripherals. Dell also sells HDTVs, cameras, printers, MP3 players and other electronics built by other manufacturers. The company is one of the largest technological corporations in the world, employing more than 103,300 people worldwide. Dell is listed at number 44 in the Fortune 500 list and is the third largest PC vendor in the world after HP and Lenovo. Dell is headquartered in Round Rock, TX (www.dell.com).
Silver Lake invests in technology and technology-enabled industries. The firm has over 100 investment professionals located in New York, Menlo Park, San Francisco, London, Hong Kong, Shanghai and Tokyo and manages approximately $14 billion (www.silverlake.com).
“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.”
The transaction will be financed through a combination of cash and equity contributed by Mr. Dell, cash funded by investment funds affiliated with Silver Lake, cash invested by MSD Capital, L.P., a $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, and cash on hand. There is no financing condition.
The agreement provides for a so-called “go-shop” period, during which a Special Committee of Dell’s Board of Directors – 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 $180 million (less than 1 percent) termination fee. For a competing bidder who did not qualify during the initial go-shop period, the termination fee would be $450 million.
“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”, said Michael Dell. “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.”
J.P. Morgan and Evercore Partners are acting as financial advisors and Debevoise & Plimpton is acting as legal advisor to the Special Committee of Dell’s Board of Directors. Goldman, Sachs & Co. is acting as financial advisor and Hogan Lovells US is acting as legal advisor to Dell. Wachtell, Lipton, Rosen & Katz is acting as legal advisor to Mr. Dell. BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets are acting as financial advisors to Silver Lake, and Simpson Thacher & Bartlett is acting as legal advisor to Silver Lake.
© 2013 PEPD • Private Equity’s Leading News Magazine • 2-6-13