Michael Dell wants to buy his company back for $23 billion

Most people know the legend, when he was 19 Michael Dell wanted to drop out of college and start his company. His mother and father had very lucrative careers as a lawyer and doctor and wanted him to stay in college. He struck a bargain with them. If he was able to start and not be profitable by the end of the summer, then he would not continue with the company and return to school. By the end of the summer, he was making more than the two of them combined.

Dell built the company into one of the largest corporations in America, after taking it public in 1988. At a point, the company’s market capitalization was well above $100 billion, making Dell one of the richest in the world. In recent years, the company has not fared well, as the market has shifted from laptops and PCs to smartphones and tablets and smartphones. Worse still, the Wall Street analysts have considerably downgraded their earnings and profit expectations of the company, causing the stock to suffer, and the company’s value to dip.

So Michael Dell wants to buy his company back. According to the plans which surfaced mid-January, the target is to execute a private-equity type structure with the company. If plans succeed, the company will be held privately for a number of years and then taken back public for a tidy profit. This deal will be the first of it kind since the financial crisis.

Dell will offer shareholders between $13.50 and $13.75 a share, said people familiar with the matter, about a 25% premium to Dell’s stock price in January before the possibility of a deal became public, according to a report from the WSJ.

The $23 billion deal which is being called risky by analysts will see Dell invest his 16% stake valued at about $3.7 billion, plus $700 million from an investment firm he controls. Microsoft would invest about $2 billion in the form of a subordinated debenture, a less-risky investment than common stock.

In addition, Silver Lake Partners, a PE firm, will invest more than $1 billion. Four banks are expected to arrange about $15 billion in debt to help fund the deal, and each would handle about a quarter of that amount, one source said.

It is unknown what Dell plans to do with his company if he is allowed to take it private, but mosts analysts expect that the deal will be successful as Dell Computer Corporation still has the specific ingredients to continue to be one of the biggest companies in the world.




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