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Dell Provides Details on $24.4 Billion Buyout, Lawsuit Surfaces

By - Source: Bloomberg | B 8 comments

The details are in Wednesday's SEC filing.

A regulatory document filed with the U.S. Securities and Exchange Commission on Wednesday revealed that private-equity firm Silver Lake invested up to $1.4 billion USD in the leveraged buyout of Dell. Company CEO and founder Michael Dell also dumped $500 million of his own cash – in addition to his 273 million shares worth $3.73 billion – into the deal. Microsoft even stepped in and loaned out $2 million while the Dell family's $12 billion investment fund, MSD Capital, added another $250 million in cash.

According to the agreement, Dell will be required to pay either $180 million or $450 million to the buyer group if it accepts a bid from another buyer. The agreement also allows the company to take buyers to court in certain circumstances to force the completion of a transaction, or to enforce a $750 million fee instead.

Currently Michael Dell and Silver Lake are offering $13.65 per share to stockholders, 25-percent more than the closing price on January 11. Michael Dell also said in the filing that he would “explore in good faith the possibility of working with any third parties regarding alternative acquisition proposals", but only if the board or its four-member special committee requests it.

Michael Dell is reportedly trying to secure $13.8 billion in loans, via Bank of America, Barclays, Credit Suisse Group and Royal Bank of Canada, to support the leveraged buyout. The loans will consist of a $4 billion term B, a $1.5 billion term C, a $2 billion portion backed by his assets, and $3.25 billion of bridge facilities. Also included is a $1.9 billion commercial receivables portion and a $1.1 billion revolving consumer receivables facility.

The filing also reveals that Dell's special committee, along with its adviser Evercore Partners, will have 45 days to "go shop" for other potential buyers. If the company finds and accepts another bid outside the current buyer group, it must pay a $180 million termination fee during that period, or $450 million after the 45-day period ends.

The deadline to complete the leveraged buyout has been set for November 5, and is contingent on approval by a majority of shareholders. Several shareholders have already protested against the deal, saying that there's a lack of specifics, and a potential conflict of interest with Michael Dell himself given that he has a 16-percent stake in the company. Some call it a "raw deal", and one shareholder is actively trying to stop the buyout through a class-action lawsuit filed in Delaware.

According to the lawsuit, the $13.65 per share offered by the buying group "sharply underestimates" the company's long-term prospects. "By engaging in the going private transaction now - in the midst of the company's transition from a PC vendor to full service software and enterprise solution provider - the board is allowing defendants M. Dell and Silver Lake to obtain Dell on the cheap," stated the lawsuit filed by Catherine Christner.

Despite rumors of a strict Microsoft cracking the whip on Dell to keep it focused on Windows and the consumer sector, executives said earlier this week that Dell will continue to focus on becoming a provider of corporate computing services. The company did not make any comments about spinning off the consumer PC business that originally put Dell on the PC map.

 

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  • 8 Hide
    wannabepro , February 7, 2013 5:12 PM
    Wait, 2 million or billion from Microsoft? I'm pretty sure that's a typo..
  • 4 Hide
    johnners2981 , February 7, 2013 5:34 PM
    wannabeproWait, 2 million or billion from Microsoft? I'm pretty sure that's a typo..

    Yeah it's supposed to be two billion
  • -9 Hide
    tobalaz , February 7, 2013 6:04 PM
    Makes me a bit sad to see MS "bribing" a company that just started offering Ubuntu laptops to refocus on the cesspool that is windows 8
  • 7 Hide
    Thunderfox , February 7, 2013 6:13 PM
    tobalazMakes me a bit sad to see MS "bribing" a company that just started offering Ubuntu laptops to refocus on the cesspool that is windows 8

    They've been offering Ubuntu laptops for years. The fact that you didn't know that is a testament to how much anybody cares.

    Windows 8 does suck though.
  • 3 Hide
    didgetmaster , February 7, 2013 6:50 PM
    So a private equity deal is being put together that is willing to offer existing shareholders 25% more for their shares than the market says they are worth trading on the open market, and some lawyer files suit saying that they are trying to buy it "on the cheap". If I were the judge in that case, I would ask her why she did not buy up as many Dell shares as she could possibly afford if she thought it was worth so much more. No good answer - then case dismissed.

    I wonder why lawyers are held in such low regard?!?
  • 2 Hide
    renosablast , February 7, 2013 7:15 PM
    Yeah, let see now, you are being offered 25% more than your shares' current market value, and that constitutes be bought out "on the cheap". Glad your crystal ball is so convinced that this new partnership is going to be wildly successful. If you are so convinced of this, then merely re-invest your buyout windfall in either Microsoft or SilverLake.
  • 0 Hide
    ven1ger , February 7, 2013 7:54 PM
    ThunderfoxThey've been offering Ubuntu laptops for years. The fact that you didn't know that is a testament to how much anybody cares. Windows 8 does suck though.


    AFAIK, their Linux offerings have been on and off again several times. I don't think it is a testament that not many care, but I think it is because it is extremely difficult to find it on Dell's website. Not to mention the fact that on the website, there is the phrase "Dell Recommends Windows", which doesn't help.

    Sad that Dell doesn't really promote their Linux offerings but the lack of interest is more of Dell's doing than anything else, especially they probably have sold some but it is just not a big enough selling point for them to put much effort into it.
  • 0 Hide
    blazorthon , February 8, 2013 6:21 PM
    ven1gerAFAIK, their Linux offerings have been on and off again several times. I don't think it is a testament that not many care, but I think it is because it is extremely difficult to find it on Dell's website. Not to mention the fact that on the website, there is the phrase "Dell Recommends Windows", which doesn't help. Sad that Dell doesn't really promote their Linux offerings but the lack of interest is more of Dell's doing than anything else, especially they probably have sold some but it is just not a big enough selling point for them to put much effort into it.


    At least in the last several years, I have yet to see a time where Dell didn't have easily found Ubuntu and Redhat options available.