Dell closer to buyout as price talks narrow: source

NEW YORK Mon Feb 4, 2013 2:04pm EST

1 of 2. A man wipes the logo of the Dell IT firm at the CeBIT exhibition centre in Hannover February 28, 2010.

Credit: Reuters/Thomas Peter

NEW YORK (Reuters) - Dell Inc moved closer to a nearly $24 billion buyout deal, with price negotiations narrowing to $13.50 to $13.75 a share in what would be the biggest leveraged buyout since the financial crisis.

Talks between Dell, the world's No. 3 computer maker, and a consortium led by its founder and chief executive, Michael Dell, to take the company private were in the final stages on Monday, a person familiar with the matter said.

An outcome is expected soon, the person said, cautioning that no final agreement had been reached and negotiations could still break down.

Dell shares fell 2.6 percent to $13.27 in afternoon trading.

Microsoft Corp, which provides its Windows software for Dell computers and is also part of the investment consortium, is expected to invest around $2 billion in the deal, while private equity firm Silver Lake is expected to put in about $1 billion, the source said.

Michael Dell is expected to roll over his roughly 16 percent stake and put in some of his own money so he has control of the company, the source added.

Dell and Silver Lake declined to comment and Microsoft did not immediately respond to a request for a comment.

The $13.50 to $13.75 per share price range being negotiated translates into an equity valuation for Dell of between $23.5 billion to $23.9 billion.

The $13.75 per share is a premium of about 23 percent to the average of $11 per share Dell traded before news of the deal talks broke and is far below the $17.61 that the shares were trading a year ago."

Dell has steadily ceded market share in PCs to nimbler rivals such as Lenovo Group and is struggling to re-ignite growth. That's in spite of Michael Dell's efforts in the five years since he retook the helm of the company he founded in 1984, following a brief hiatus during which its fortunes waned rapidly.

Any deal that Michael Dell negotiates would need the approval of a majority of the shareholders. Deals that involve the considerable stake of a founder who is also the chief executive of the company are also likely to come in for extra scrutiny over whether the board exercised its fiduciary duty.

Dell has formed a special committee to take a close look at any potential deals on the table, multiple sources with knowledge of the matter told Reuters earlier.

(Reporting by Greg Roumeliotis in New York; Additional reporting by Poornima Gupta; editing by Carol Bishopric and Kenneth Barry)

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Comments (4)
JapanViewer wrote:
Just to be clear: This is a company founded by Mr. Dell, who then “retook the helm of the company”, who now wants to “retake the retaking of the company”. I guess three time’s a charm?

Feb 04, 2013 2:53pm EST  --  Report as abuse
foiegras wrote:
Take it private, leverage it out to buy back the stock, secure the new debt with assets (patents, whatever), subordinate the existing debt to the new secured debt (hello junk rating), give the buyout shop its cut, take a cut for yourself, try to sell PCs when PCs are obsolete (they’re the SUVs of tomorrow), go bankrupt in five years, screw the bond holders. Here we go again with the free money, the LBOs, the drive-it-into-the ditch syndrome…it’s no old it’s new.

Feb 04, 2013 3:25pm EST  --  Report as abuse
Dichotomous wrote:
I hope the whole deal blows up in his face. This is the worst company I’ve ever had to deal with and they deserve nothing less than total annihilation! Michael Dell is a total idiot.

Feb 04, 2013 3:46pm EST  --  Report as abuse
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