Sign in with
Sign up | Sign in

Michael Dell Using Own Money to Take Control of Company

By - Source: Bloomberg | B 20 comments

Dell wants to take control of Dell.

Bloomberg reports that Dell CEO Michael Dell is looking to gain a majority control of the company he founded in 1984 by combining his 15.7 percent stake, which is worth a meaty $3.6 billion USD, with up to $1 billion of his own personal funds in equity financing. So far Microsoft is still on board to provide part of the funding in a buyout headed by Silver Lake Management.

Unnamed sources said that Michael Dell's personal investment will push his ownership stake of Dell well past 50-percent. This will enable him to reposition the company as PC sales shrink due to an industry shift over to cloud and mobile-based computing. The company is looking to go private, eliminating the "scrutiny" and stock fluctuations associated with public trading, so that the company can focus on reinventing itself.

Bloomberg reports that between his current stake and up to $1 billion in personal funds, Michael Dell would be putting up more than half of the total $8 billion to $9 billion equity check for going private. The remainder of the takeover would be financed by debt and maybe even some of the $11 billion in cash the company said it had back in September 2012. Silver Lake and Microsoft are expected to invest between $1 billion and $2 billion each.

Unnamed sources close to the situation said that Michael Dell, the special committee formed by the company's board, and their financial advisers, Evercore Partners Inc., are finalizing the details of the equity financing. They're also making sure they have explored all avenues including selling the company to other buyers, and a possible dividend recapitalization. The committee and financial advisers are also reportedly being extra cautious due to Michael Dell's possible financial involvement to make his company private.

Silver Lake and its partners have reportedly stockpiled around $15 billion in funds for a buyout of Dell if the CEO chooses not to make a personal investment. The company's value would hover around $23 billion to $24 billion thanks to the deal. By going private, stocks will likely be worth $14 a share or less, sources said.

 

Contact Us for News Tips, Corrections and Feedback

Display 20 Comments.
This thread is closed for comments
Top Comments
  • 12 Hide
    freggo , January 31, 2013 9:37 PM
    "15.7 percent stake, which is worth a meaty $3.6 billion USD,"

    So a Billion will get him another approx 5% for a total of about 20%
    How does that 'control' the company ?

    Just curious how the math works.
Other Comments
  • 12 Hide
    freggo , January 31, 2013 9:37 PM
    "15.7 percent stake, which is worth a meaty $3.6 billion USD,"

    So a Billion will get him another approx 5% for a total of about 20%
    How does that 'control' the company ?

    Just curious how the math works.
  • 3 Hide
    azraa , January 31, 2013 9:50 PM
    20% IS a huge share, my friend.
    Most shareholders have less than that, summing up to 100%
    Usually the boards are made of the top % owners.
  • 8 Hide
    dns7950 , January 31, 2013 9:56 PM
    freggo"15.7 percent stake, which is worth a meaty $3.6 billion USD,"So a Billion will get him another approx 5% for a total of about 20%How does that 'control' the company ?Just curious how the math works.

    Read the article thoroughly.
    Quote"Bloomberg reports that between his current stake and up to $1 billion in personal funds, Michael Dell would be putting up more than half of the total $8 billion to $9 billion equity check for going private. The remainder of the takeover would be financed by debt and maybe even some of the $11 billion in cash the company said it had back in September 2012. Silver Lake and Microsoft are expected to invest between $1 billion and $2 billion each."



  • 8 Hide
    kinggremlin , January 31, 2013 9:57 PM
    azraa20% IS a huge share, my friend.Most shareholders have less than that, summing up to 100%Usually the boards are made of the top % owners.


    No, the OP is right, once again THG fails at math.

    Article says that his $1 billion investment will push his stake past 50%. If he currently controls 15.7%, which is worth $3.6 billion, then adding $1 billion doesn't push his stake to over 50%. $4.6 billions is not over 50% of 23-24 billion.
  • 3 Hide
    Anonymous , January 31, 2013 10:02 PM
    Here is a simple example:

    Dell is bought for $20B fund by Michael Dell ($4B), MS ($2B), SL ($2B) and debt ($12B)

    Michael Dell will then own 50% and MS and SL will each own 25%. The $12B in debt can be paid off by the cash Dell currently has.
  • 0 Hide
    Shin-san , January 31, 2013 10:12 PM
    Wow. Microsoft could buy them out by themselves. Wouldn't be a good idea though
  • 4 Hide
    tokencode , January 31, 2013 10:15 PM
    fugglyHere is a simple example:D ell is bought for $20B fund by Michael Dell ($4B), MS ($2B), SL ($2B) and debt ($12B)Michael Dell will then own 50% and MS and SL will each own 25%. The $12B in debt can be paid off by the cash Dell currently has.



    Exactly, those criticizing the math are forgetting the cash on hand at the company. If you own 15% of the company, you also own 15% of the $11b cash that they have.
  • -1 Hide
    soundping , January 31, 2013 10:39 PM
    Hardware DRM = less sells.
  • -3 Hide
    jdwii , January 31, 2013 10:49 PM
    If the guy wasn't so greedy he would have all his share or enough to own the company
  • 1 Hide
    anti-painkilla , January 31, 2013 10:57 PM
    tokencodeExactly, those criticizing the math are forgetting the cash on hand at the company. If you own 15% of the company, you also own 15% of the $11b cash that they have.


    No you don't. It belongs to the company and not you.

    He is using his shares, personal money PLUS other investors.
  • 0 Hide
    DryCreamer , January 31, 2013 11:02 PM
    its about time!

    Dry
  • 3 Hide
    stickmansam , January 31, 2013 11:20 PM
    anti-painkillaNo you don't. It belongs to the company and not you.He is using his shares, personal money PLUS other investors.


    All he has to do is get the company to buy back stock, thus increasing his market share, or get the company to pay dividends to share holders to get cash that way
  • 1 Hide
    Benthon , January 31, 2013 11:58 PM
    Really excited to see what reinventing happens here!
  • 3 Hide
    tokencode , February 1, 2013 12:11 AM
    stickmansamAll he has to do is get the company to buy back stock, thus increasing his market share, or get the company to pay dividends to share holders to get cash that way



    Exactly, if you were to buy the company outright for $20b, included with the company is $11b in cash. The difference is $9b, of which $3.6b is owned by Michael. If he buys another $1b with his own money, he now owns $4.6b of the $9b in share value, over 50%. I believe that is where the number comes from.
  • -1 Hide
    kinggremlin , February 1, 2013 12:57 AM
    tokencodeExactly, those criticizing the math are forgetting the cash on hand at the company. If you own 15% of the company, you also own 15% of the $11b cash that they have.


    The reason the math doesn't make sense is because the purchase would require about $15 billion of the 20+ billion price to be financed which is glossed over by the article. This would result in as much as $900 million in annual interest payments alone. Who is going to want to finance that? Dell has cash but, they wouldn't spend it all on the purchase. That would make zero sense. Also, a large chunk of it is overseas to avoid paying taxes on it. It would have to be brought to the US at about a 30% tax before it could be used.
  • 0 Hide
    zulutech , February 1, 2013 12:58 AM
    kinggremlinNo, the OP is right, once again THG fails at math.Article says that his $1 billion investment will push his stake past 50%. If he currently controls 15.7%, which is worth $3.6 billion, then adding $1 billion doesn't push his stake to over 50%. $4.6 billions is not over 50% of 23-24 billion.

    No no, that's not how it works. To be the majority decision maker he needs the largest percent that anyone has. No one else individually holds more than 20% of Dell.
  • 4 Hide
    ruel24 , February 1, 2013 1:43 AM
    Controlling interest is enough to have the power to wield at will. A man named Smale had just 1% of GM stock in the early 1990's and pushed his weight around to have the CEO fired. Bill Gates had like 30% of Microsoft stock.

    Majority interest is when you have more than 50% of stock.

    Sometimes a minority holder has majority interest, such as the Ford Family. They have special stock that, collectively, gives them 51% of the voting shares.
  • 1 Hide
    Gundam288 , February 1, 2013 3:53 AM
    ruel24Controlling interest is enough to have the power to wield at will. A man named Smale had just 1% of GM stock in the early 1990's and pushed his weight around to have the CEO fired. Bill Gates had like 30% of Microsoft stock.

    Any chance Bill Gates will pull a "Smale" and have Steve Ballmer fired?
  • 0 Hide
    bit_user , February 1, 2013 4:34 AM
    He should just let it go and do something else with the rest of his life and money.

    Love him or hate him, Bill Gates has probably saved millions of lives by now, in his quest to fight infectious diseases.

    So what, if Dell goes under. Someone else would just take their place. But I'm sure Michael Dell really could make a real impact in a whole range of other areas.
  • 1 Hide
    iamtheking123 , February 1, 2013 6:47 AM
    zulutechNo no, that's not how it works. To be the majority decision maker he needs the largest percent that anyone has. No one else individually holds more than 20% of Dell.

    Being the largest shareholder doesn't mean you have control. To have control means you have at least 51% ownership, where you can ignore the other 49%.