Dell to Go Private for $25 Billion

Jacob Harper |

The battle over the future of pioneering PC maker Dell Inc. (DELL) is finally over, with a preliminary vote tally showing shareholders have approved CEO Michael Dell’s plan to buy out existing investors and take the company private. The buyout, which will total approximately $25 billion and price out the PC maker at $13.88 a share, ends a protracted war over the future of the company that had raged all year between Dell and billionaire Carl Icahn.

Icahn wanted to keep the company public, and had actually offered a higher price for the company, although his plan would have indebted the company and involved complex restructuring that made some investors leery.

Icahn and Dell had been jockeying back and forth since Feb 5, when Michael Dell first announced he was seeking to take the company off the market with a $24.4 billion payout. In March Icahn countered Dell’s plan with another offer. Then Dell countered with another, and the battle over Dell was on. Blackstone Group LP (BX) was even involved in the bidding war for a time, although they withdrew in April, leaving Icahn and Dell to duke it out.

As the two went back and forth over the summer, Dell seemed to be gaining the edge with shareholders, as his plan was simpler, and attractive to investors: it put money right in their pockets. Icahn suffered a major blow when influential advisory firm Institutional Shareholder Services recommended to shareholders that they accept Dell’s original offer. Undeterred, Icahn lashed out at the Dell board for postponing a vote to consider another improved offer from Dell, then bought 4 million more shares of the stock.

Ultimately, it wasn’t enough, and on Sept 12 the board finally went with Dell. Now that the company will be off the market, Dell plans to refocus its operations, as the former giant has gone from the world’s leading PC maker in 1999 to now being a distant third. The PC market itself is dying, with global PC sales dropping 7 percent this year, and Dell’s revenue expected to fall for the next three years at least. As a private enterprise, Michael Dell reportedly plans on slowly transitioning Dell's focus towards software.

Dell engineered the deal in conjunction with private equity group Silver Lake. The deal, reportedly approved by 65 percent of shareholders, is expected to close before the end of the company’s third fiscal quarter.

Dell, Inc. remained virtually flat on the news, as the announced final price tag of the company is pretty much in line with its current market value. The stock was up a mere .04 percent to settle at $13.85 a share.

 

(image of Michael Dell courtesy of Flickr)

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Companies

Symbol Name Price Change % Volume
BX The Blackstone Group L.P. Representing Limited Par 26.40 0.54 2.09 2,995,597
JAYAF PT Jaya Konstruksi Manggala Pratama TBK n/a n/a n/a 0

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