Dell has signed a definitive merger agreement under which Michael Dell, Dell’s founder, chairman and CEO, in partnership with global technology investment firm Silver Lake, will acquire Dell.
Under the terms of the agreement, Dell stockholders will receive $13.65 in cash for each share of Dell common stock they hold, in a transaction valued at approximately $24.4 billion. The price represents a premium of 25 percent over Dell’s closing share price of $10.88 on Jan. 11, 2013, the last trading day before rumors of a possible going-private transaction were first published; a premium of approximately 35 percent over Dell’s enterprise value as of Jan. 11, 2013; and a premium of approximately 37 percent over the average closing share price during the previous 90 calendar days ending Jan. 11, 2013. The buyers will acquire for cash all of the outstanding shares of Dell not held by Mr. Dell and certain other members of management.
The Dell board acting on the recommendation of a special committee of independent directors unanimously approved the merger agreement. Mr. Dell had first approached the company’s board of directors in August 2012 with an interest in taking the company private.
The merger agreement provides for a so-called “go-shop” period, during which a special committee, with the assistance of Evercore Partners, will look at any alternate offers as may be. The initial go-shop period is 45 days. 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.
Michael Dell: 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.
Following completion of the transaction, Mr. Dell, who owns approximately 14 per cent of Dell’s common shares, will continue to lead the company as chairman and CEO, 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 Mr. Dell, cash funded by investment funds affiliated with Silver Lake, a cash investment by an investment fund affiliated with MSDC Management, 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 (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, and is expected to close before the end of the second quarter of Dell’s FY2014.
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 is acting as financial advisor and Hogan Lovells is acting as legal advisor to Dell. Wachtell Lipton Rosen & Katz is acting as legal advisor to Mr. Dell. Bank o f America 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.
[Image courtesy: Dell]