Michael Dell to lead buyout of Dell Inc by next week

1 Feb 2013

Michael Dell, chairman of the board of directors and CEO of Dell

Michael Dell, with the support of a consortium of investors that includes venture capital firm Silver Lake Partners and software giant Microsoft, could take control of the company he founded in 1984 as early as next week.

Dell, which has a market value of US$23bn, is set to delist and go private in a move that will give the company greater control over its destiny in a much-changed software and hardware world.

For one thing, the computing industry is increasingly a mobile business that is dominated by companies like Amazon, Apple and Google rather than PC stalwarts like Microsoft, HP and Dell. IBM wisely got out of the PC business altogether several years ago.

While sentiment may be against the old guard, the reality is they still manufacture and provide the tools that control the hard metal – ie, the servers – that keeps the network economy’s heart beating.

Dell knows this and as it regroups to focus on new hardware and its edge in cloud computing, it is likely to achieve its goals without the distraction of a fickle investor community.

It is understood that the deal to pay off shareholders could be the largest leverage buyout since the financial crisis struck in 2008.

The transaction details are currently being finalised with a view to concluding the transaction next week.

Debt financing from four banks – Barclays, Bank of America Merrill Lync, Credit Suisse and RBC Capital – of up to US$15bn has been secured, according to Reuters.

Michael Dell may contribute equity financing of US$500m to US$1bn in addition to his 16pc share of Dell, which is worth US$3.6bn. This will provide him with majority control of the company he founded almost 30 years ago in a college dorm in Texas.

Silver Lake and Microsoft are believed to be contributing between US$1bn and US$2bn each towards the transaction.

So, by next week, Dell could be a private company with greater control of its own destiny in a much-changed technology landscape.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years