Computing giant Dell has ended weeks of speculation and numerous rumors by announcing the company's move to go private, after more than two decades on the stock market.
Founder and chief executive Michael Dell and investment firm Silver Lake offered $24.4 billion, or $13.65 per share. The price is a 25 percent premium on Dell's closing share price of $10.88 on January 11, just before the rumors of the buy-out began.
While Michael Dell will become the sole individual majority owner of the company he founded by holding a 14 percent take in the deal, others will become minority investors. He will remain the company's chief executive officer.
Dell's board met last night to vote on the deal. The vote unanimously fell in favor of Dell going private.
However, the deal still has to pass the regulators. The transaction is expected to close by Dell's fiscal second quarter later this year.
It is understood that the deal is the largest buyout since the global financial crisis (or "credit crunch"), which hit financial markets worldwide for two years beginning late 2007.
It comes after weeks of rumors that the world's number three PC maker by shipments was planning a move to go private, releasing the company from the burdens of having to report its finances every quarter and each fiscal year, and report to shareholders.
Microsoft, which provides its Windows operating systems for Dell machines, provided a $2 billion loan to the deal. Exactly how that's going to play out in the long run will be interesting, considering Dell offers Linux-based software on both its desktop PCs and on its range of servers. ZDNet's Larry Dignan has more on this.
"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," the software giant said in a statement released earlier today.
Dell was also given debt financing by Bank of America Merrill Lynch, Barclays, Credit Suisse, and RBC Capital Markets.
Related: Will Microsoft's $2 billion stake in Dell play out like its Nokia partnership? | Microsoft's a player in Dell private equity play: Here's why | Dell going private, a good thing for all | Microsoft statement | Dell statement | Techmeme
In prepared remarks, company founder 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.
Here are the numbers you need to know:
- Dell stockholders will receive $13.65 per share in cash;
- Overall transaction is valued at approximately $24.4 billion;
- Michael Dell owns 14 percent of Dell's common shares, making him the largest sole stakeholder in the now-private company;
- 25 percent premium on Dell's share price since the rumor mill began to churn;
- 35 percent premium of Dell's enterprise value since the going-private rumors began;
- Dell has been on the stock market for 24 years;
- According to IDC figures, Dell remains the third largest PC maker worldwide by shipments after HP and Lenovo.
In 2012, the company shipped 38.7 million PCs, but its share declined by more than 12 percent year-over-year, losing out to rival PC makers and post-PC device manufacturers.
The firm already has a number of key acquisitions under its belt, notably software services giant Quest, as it attempts to transition away from hardware into a services business, but has yet to make its mark on the long-term revenue grabber—the business and enterprise market.
Going forward, Dell now has to focus on reinvigorating life back into its corporate technology and enterprise business focus. A continued decline in the PC market could spell continued trouble for the PC maker as it struggles to realign itself to an ever-burgeoning post-PC market of tablets, smartphones, and cloud-based technologies.