Is Michael Dell Aiming for Majority Control to Take Dell Inc. Private?

By Christopher Mohr January 31, 2013

According to unidentified sources with Bloomberg familiar with the deal, Dell Inc. founder and CEO, Michael Dell, is in the process of buying majority control of the Round Rock, Texas-based company. The move may be a step within a process to take the company private.

Michael Dell, who owns 15.7 percent of the company, may contribute anywhere from $500 million to $1 billion of his personal funds to provide equity financing. Silver Lake Management, LLC and Microsoft may each provide additional funding.

Lackluster sales in PCs have led to declining revenue and stock prices for Dell. As mobile and cloud computing continue to gain popularity, Dell's survival as a company requires that it adjust its efforts toward these technologies.

Taking the company private would allow Michael Dell to make these adjustments more easily. He would avoid the likely stock price fluctuations and public scrutiny that would come from such a transition.

Michael Dell's interest in Dell Inc. is approximately $3.6 billion. After adding the $500 to $1 billion of his personal funds, he would have over half the funds for the $8-9 billion equity check. Additional funds for the takeover could come from debt financing. Silver Lake and Microsoft would contribute about $1-2 billion each and some of the cash Dell Inc. reported having at the end of the third quarter, 2012 may also be included, according to sources with Bloomberg familiar with the deal.

Michael Dell is moving forward cautiously, as any attempt to take Dell Inc. private may have conflicts. The special committee of the board of Dell Inc., their advisers and Michael Dell are examining all possible alternatives such as a sale to other buyers, before proceeding with any deal.

The special committee is being advised by Evercore Partners Inc., which has approached other possible buyers, but so far none has stepped forward. Other options for Dell Inc. would include a dividend recapitalization. The company would take on debt to increase shareholders' value.

Dell Inc. and Silver Lake have had negotiations about a deal that would take the company private at approximately $14 per share, valuing the company at about $23 billion. A group led by Silver Lake has acquired $15 billion in funds to buyout Dell Inc.

As successful as Dell Inc. has been in the PC industry, the reality is that PCs are a declining market. To do nothing would put Dell Inc. in the same position as buggy whip makers at the birth of the automobile era; it would not matter how good your product was if it became obsolete.

Michael Dell's apparent actions are a necessary move in a changing market. What remains to be seen is whether or not Dell Inc. will have the same success in mobile and cloud computing as they did with the PC.




Edited by Brooke Neuman

TechZone360 Contributing Writer

SHARE THIS ARTICLE
Related Articles

Cortana/Siri vs. Alexa & The Road To Robotic Post Smartphone Era

By: Rob Enderle    5/3/2016

Last week Microsoft made it clear that Cortana would only work with Microsoft's browser and search products making people question its cross platform …

Read More

Looking For The Next iPod/Echo

By: Rob Enderle    4/29/2016

The Amazon Echo, not the Apple Watch, became the last iPod-like product largely because of a far more accessible price point, a more compelling name, …

Read More

Apple Needs Reset, Not Elon Musk

By: Doug Mohney    4/29/2016

Apple's 13 percent sales decline and subsequent stock price drop this week has lead to the usual crazy talk about how to "fix" the company. Vivek Wadh…

Read More

Is the Apple Bubble Finally Bursting?

By: Andrew Bindelglass    4/28/2016

Over the past 13 years, Apple has been one of the most successful companies in the world of tech, posting sales growths in 51 straight quarters. That …

Read More

Shared-Space Providers (Airbnb) Poised to Beat Ride-Sharers (Uber)

By: Steve Anderson    4/28/2016

Travel may be starting to make a bit of a comeback, as a new report suggests that shared-space providers like Airbnb and WeWork are on the rise.

Read More