Computer giant Dell opts for private ownership

Dell, a major provider of rugged commercial, off-the-shelf (COTS) computers to the military, said it was taking itself private Feb. 5, company officials said.

The Round Rock, Texas-based company has arranged a definitive merger agreement under which Michael Dell, Dell’s founder, chairman and CEO, in partnership with global technology investment firm Silver Lake, will acquire Dell, the officials said.

The computer giant, which has experienced declining sales, is leaving the stock market in a $24.4 billion buyout that represents the largest deal of its kind in the current recession, said the Associated Press.

The new management will attempt turnaround away from the scrutiny and financial pressures of Wall Street, AP said.

Under the terms of the agreement, Dell stockholders will receive $13.65 in cash for each share of Dell common stock they hold, in a transaction valued at approximately $24.4 billion, company officials said.

The share price is 25 percent more than the $10.88 the stock was going for before word of the buyout talks trickled out last month. But it’s a steep markdown from the shares’ price of $26 less than five years ago, when its founder Michael Dell returned for a second stint as CEO, AP said.

Dell shares rose 11 cents to $13.38 per share in morning trading, indicating that investors don’t believe a better offer is likely, AP said.
 
Company shares rose 11 cents to $13.38 per share in morning trading, indicating that investors don’t believe a better offer is likely.

Dell’s decision to go private is a reflection of the tough times facing the personal computer industry as more technology spending flows toward smart phones and tablet computers, AP said. PC sales fell 3.5 percent in 2012, according to Gartner. In addition, tablet computers are expected to outsell laptops this year, AP said.

The shift has weakened long-time stalwarts such as Dell, fellow PC maker Hewlett-Packard, Microsoft Corp. and others, AP said.

The company will solicit competing offers for 45 days.

Following completion of the transaction, Michael Dell, who owns about 14 percent of Dell’s common shares, will continue to lead the company as chairman and CEO and will maintain a significant equity investment in Dell by contributing his shares of Dell to the new company, as well as making a substantial additional cash investment, company officials said. 

About the Author

William Welsh is a freelance writer covering IT and defense technology.

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