PC giant Dell in $24.4 billion deal to go private

Cadie Thompson , CNBC.com ? ? ? 3 hrs.

Dell agreed to be taken private Tuesday in a $24.4 billion buyout deal by a consortium led by its founder and chief executive, Michael Dell, in the biggest leveraged buyout since the 2008 financial crisis.

According to the agreement, shareholders will receive $13.65 in cash per share for common stock in a deal that will allow Dell and the private-equity firm Silver Lake Partners to acquire the company.

Microsoft, which provides software for Dell computers and is also part of the investment consortium, will invest $2 billion in the deal. Michael Dell will also roll over his roughly 16 percent stake and put in some of his own money so he has control of the company.

Dell's Board of Directors unanimously approved the merger agreement for Dell and Silver Lake to purchase the company and take it private with a number of conditions, including a vote of the unaffiliated stockholders.

The agreement provides for a "go-shop" period of initially 45 days. The special committee?which was formed when Michael Dell initially approached the board of directors about taking the company private? along with Evercore Partners, will solicit and evaluate and negotiate alternative proposals.

After the 45 day period, a special committee will be allowed to continue discussions and enter into a transaction with any bidder that submitted a proposal during the initial 45-day period. A bidder that makes a qualifying proposal would face a $180 million termination fee and a bidder that does not qualify will face a $450 million fee, according to the agreement.

While the board approved a $13.65 price per share to the shareholders, the final share price could be higher, said David Katz, chief investment strategist at Matrix Asset Advisors, which owns over one million shares of Dell.

"We think this is the first step of a process. We don't think anything is going to come from the "go-shop" provision. We do believe, however, there are going to be a number of class-action suits challenging the price," he said.

"We think generally what happens in these things is the ultimate price is going to be negotiated up with a sweetener and we think when all is said and done the price probably gets to the $14.25 to $14.50, to $14.65 level and there's a great likelihood the deal gets done and we think it gets done with a 14 handle, so we would sit tight with the stock here."

Katz said that his firm sees Dell returning to growth, however, it may take a few years. He said because the public markets are not giving Dell any credit for its future and not willing to take on risk, he understands why Michael Dell wanted to take the company private.

"We don't believe Dell is broken, we think they've done some very good things to get to be a software services and enterprise company. You're not going to see that significantly until 2015, 2016. But we think they are going to return to a growth company," he said. "We don't believe the actual PC business is dead, but we do think other areas, like enterprise, are going to be a better business."

Dell shares were up during early morning trading.

Source: http://www.nbcnews.com/business/pc-giant-dell-24-4-billion-deal-go-private-1B8246436

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