Dell Inc., the world’s third-biggest maker of personal computers, is going private in a deal valued at $24.4 billion, undertaking the biggest leveraged buyout since the financial crisis.
Chief Executive Officer Michael Dell and Silver Lake Management LLC will pay $13.65 a share, the companies said today in a statement. That’s 25% more than the closing price of $10.88 on Jan. 11, the last trading day before Bloomberg News reported the discussions. Michael Dell is taking back majority control of the company he started almost three decades ago.
The stock has lost more than half its value since January 2007, when Dell resumed his role as CEO, amid investor dismay with management’s failure to cope with upstart competitors in mobile and cloud computing. By going private after a quarter- century as a publicly traded company, Dell is seeking more leeway to cut jobs and adopt strategy shifts needed to court high-margin customers spending billions on data centers.
“They obviously see the writing on the wall,” said Daniel Morgan, a senior portfolio manager at Synovus Trust Co. in Atlanta. “They understand what the challenges are and realize they need to refurbish what they are doing.”
Even as being private shields Round Rock, Texas-based Dell from answering to public shareholders on a quarter-by-quarter basis, it subjects the company to new constraints, including the addition of debt. Following the transaction, Michael Dell will be chairman and chief executive, maintaining “significant equity,” according to the statement.
Microsoft Corp. is contributing $2 billion, according to the statement. Silver Lake, a technology-focused private-equity firm, was working with partners to line up about $15 billion in funds for the buyout, people familiar with the matter have said.
Dell, which trails Hewlett-Packard Co. and Lenovo Group Ltd. in the PC market, was halted in U.S. trading. Its stock plummeted 31% last year as it struggled to adapt to the industry-wide shift to smartphones, tablet computers and cloud computing services.
Consumers and companies are shunning PCs in favor of mobile devices made by Apple Inc. and Samsung Electronics Co., and Dell lags behind Oracle Corp., Cisco Systems Inc. and International Business Machines Corp. in data-center hardware, software and services.
Dell has seen its fortunes rise and fall since holding an initial public offering in 1988. CEO Dell, who founded the company with $1,000 in 1984 in his University of Texas dorm room, was viewed as an industry wunderkind, demonstrating that he could sell complex products more efficiently and conveniently than was thought possible.