By Andrea Chang
10:13 AM EST, February 5, 2013
After struggling for years to remake itself, Dell Inc. has announced it will be taken private in a deal valued at about $24.4 billion.
Under the terms of the agreement, the Round Rock, Texas, company will be acquired by Dell founder and Chief Executive Michael S. Dell and global technology investment firm Silver Lake.
Microsoft Corp. will invest $2 billion in the deal, a move the Redmond, Wash., company said it was undertaking to help support "the long-term success of the entire PC ecosystem."
Dell -- which has fallen behind competitors including Hewlett-Packard Co. -- announced the deal early Tuesday. It is the biggest leveraged buyout since the recession.
"I believe this transaction will open an exciting new chapter for Dell, our customers and team members," Michael Dell said in a statement. "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."
Michael Dell currently holds about a 16% stake in the company, which he has been trying to turn around amid a slump for PCs.
Dell stockholders will receive $13.65 in cash for each share of Dell common stock they hold, representing a premium of 25% over Dell's closing share price of $10.88 on Jan. 11, the last trading day before rumors of a possible sale began. The buyers will acquire for cash all of the outstanding shares of Dell not held by Michael Dell and some other members of management.
Dell said its board of directors, acting on the recommendation of a special committee of independent directors, unanimously approved the agreement. The transaction is expected to close before the end of the second quarter of Dell's fiscal year.
The personal computer maker said it would solicit competing offers.
Dell said the transaction "strengthens Dell's capabilities to bring industry-leading, differentiated, simplified and easy-to-manage solutions to customers worldwide."
"Dell has always been focused on delivering a best-in-class customer experience and our top priority is to ensure that customer needs are met," the company said in a statement. "Our potential new owners are equally dedicated to winning in the marketplace."
The company currently has a $23.05-billion market cap, with shares that closed Monday at $13.27. In 2000, at the height of the dot-com boom, Dell was the world's largest PC maker with a market value of more than $100 billion, the Associated Press said.
The going-private deal is already making waves across the personal computer industry. Rival Lenovo said in a statement Tuesday that "the financial actions of some of our traditional competitors will not substantially change our outlook."
"We are focused on our products, customers and overall execution rather than distracting financial maneuvers and major strategic shifts," Lenovo said. "This focus is an advantage for us and a benefit to our customers."
Away from the scrutiny and glare of Wall Street, the company might stand a better chance of long-term success. Dell has for years tried to transform itself as it runs into increased competition from Lenovo, Apple, Google, Acer, IBM, Samsung and HP. Currently about 45% to 50% of its revenue is estimated to come from desktop and notebook PCs.
The company has $11.3 billion in cash and $5.3 billion in long-term debt.
In 1984, when he was 19, Michael Dell started PC's Limited in his University of Texas at Austin dorm room with $1,000. The company would go on to become Dell.
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