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Dell may go private in $24.4 billion deal, including $2 billion loan from Microsoft

Dell may go private in $24.4 billion deal, including $2 billion loan from Microsoft

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Dell has officially closed a buyout of the company, taking the company off the publicly-traded stock market and into private hands. The deal is being financed by cash and equity from CEO Michael Dell, funds from investment firms Silver Lake and MSD Capital, a $2 billion loan from Microsoft, plus debt financing from a number of banks as well as Dell's cash on hand. Dell's shareholders will receive $13.65 for each share of common Dell stock they hold, up about 25 percent from Dell's closing share price of $10.88 back on January 11th, which Dell says is the last day prior to rumors of the buying starting to circulate. Those rumors have escalated in the last week, when Bloomberg and The Wall Street Journal reported that discussions to bring Dell private were serious, and that a deal could be reached in the following six weeks.

Bloomberg also reports that board members met last night to vote on the move, while the Wall Street Journal cites top execs as saying company founder Michael Dell is a man "increasingly worried about his legacy." Michael Dell has reportedly lost enthusiasm for the day-to-day running of the company since reclaiming his position as CEO of the company in 2007.

Dell is giving the money back to the shareholders

As rumored earlier, Microsoft helped broker the deal, offering a reported $2 billion to facilitate the sale. As to why Microsoft would want to own a chunk of Dell, it may be that Microsoft wants to ensure a major partner persists with Windows over Android or Chrome OS; it could also have something to do with the more-than 2,400 patents that the Texas-based manufacturer has to its name.

Microsoft has released a brief statement regarding the loan:

Microsoft has provided a $2 billion loan to the group that has proposed to take Dell private. Microsoft is committed to the long term success of the entire PC ecosystem and invests heavily in a variety of ways to build that ecosystem for the future.We're in an industry that is constantly evolving. As always, we will continue to look for opportunities to support partners who are committed to innovating and driving business for their devices and services built on the Microsoft platform.

Dell has struggled in recent years to maintain its position in the PC industry, losing more than a third of its value in 2012. By going private, however, the company won't have to deal with quarter-to-quarter scrutiny from shareholders as it attempts to turn things around. According to Dell's press release, the company has been investigating this process since August of 2012, when Michael Dell approached the company's board of directors with to discuss his interest in taking the company private. From there, a "special committee" was formed to lead Dell through the transition.

Michael Dell said the following in an official statement regarding the transaction:

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.Dell's founder, chairman, and CEO also sent a letter to employees detailing the change, describing it as an "exciting new chapter" in the company's history:

Today, we announced a definitive agreement for me and global technology investment firm Silver Lake to acquire Dell and take it private.

This transaction is an exciting new chapter for Dell, our team and our customers. We can immediately deliver value to stockholders, while continuing to execute our long-term growth strategy and focus on helping customers achieve their goals.

Together, we have built an incredible business that generates nearly $60 billion in annual revenue. We deliver enormous customer value through end-to-end solutions that are scalable, secure and easy to manage, and Enterprise Solutions and Services now account for 50 percent of our gross margins.

Dell’s transformation is well underway, but we recognize it will still take more time, investment and patience. I believe that we are better served with partners who will provide long-term support to help Dell innovate and accelerate the company’s transformation strategy. We’ll have the flexibility to continue organic and inorganic investment, and grow our business for the long term.

I am particularly pleased to be in partnership with Silver Lake, a world-class investment firm with an outstanding reputation and significant experience in the technology sector. They know all the technology business models, understand the value chain and have an extremely strong global network of contacts. I am also glad that Microsoft is part of the transaction, further building on a nearly 30-year relationship.

I am honored to continue serving as chairman and CEO, and I look forward to working with all of you, including our current senior leadership team, to accelerate our efforts. There is much more we can accomplish together. I am committed to this journey and I am grateful for your dedication and support. Please, stay focused on delivering results for our customers and our company.

There is still considerable work to be done, and undoubtedly both challenges and triumphs lie ahead, but as always, we are making the right decisions to position Dell, our team and our customers for long-term success.


Read our report: Microsoft's loan to Dell is a protective move to secure big business

Aaron Souppouris and T.C. Sottek contributed to this report.