* Michael Dell putting up $500 mln, his investment firm $250
* Termination fee up to $750 mln possible
* Deal will target the repatriation of $7.4 bln cash from
By Edwin Chan
SAN FRANCISCO, Feb 6 Michael Dell and his
investment firm are ponying up $750 million in cash toward the
$24.4 billion purchase of Dell Inc to help bankroll the
largest private equity-backed buyout since the financial crisis.
The Dell founder and CEO this week struck a deal to take
private the company he created out of a college dorm room in
1984, partnering with private equity house Silver Lake and
Michael Dell will contribute $500 million of his own cash,
and MSDC Management - an affiliate of his investment vehicle,
MSD Capital - will contribute another $250 million, according to
a company filing on Wednesday.
Dell Inc also said it is targeting the repatriation of $7.4
billion of cash now parked abroad to help finance the deal. That
may dismay some shareholders, as a hefty tax is usually levied
on cash brought back from overseas.
The deal, which ends Dell's rocky 24-year run on the Nasdaq
just as the once-dominant PC maker struggles to revive growth,
is contingent on approval by a majority of shareholders --
excluding Michael Dell himself.
Several shareholders, including prominent investor Frederick
"Shad" Rowe of Greenbrier Partners, have spoken out against the
deal, protesting a lack of specifics as well as a potential
conflict of interest with Michael Dell being the company's
single largest shareholder with a roughly 16 percent stake.
"Some shareholders are glad. But there are others who feel
it's a raw deal," said Shaw Wu, an analyst with Sterne Agee, who
has spoken with several Dell shareholders since the announcement
but declined to provide further details.
AND SO IT BEGINS
Dell was regarded as a model of innovation as recently as
the early 2000s, pioneering online ordering of custom PCs and
working closely with Asian suppliers and manufacturers to assure
rock-bottom production costs. But it missed the big industry
shift to tablet computers, smartphones and high-powered consumer
electronics such as music players and gaming consoles.
Executives said on Tuesday the company will stick to a
strategy of expanding its software and services offerings for
large companies, with the goal of becoming a provider of
corporate computing services - like the highly profitable IBM
. They played down speculation the company may spin off
the low-margin PC business on which it made its name.
The company has not given many specifics on what it would do
differently as a private entity, angering some shareholders who
said they needed more information to determine whether the
$13.65-a-share deal price - a 25 percent premium to Dell's stock
price before buyout talks leaked in January - was adequate.
On Wednesday, an individual shareholder filed the first
lawsuit, in Delaware, attempting to stop the buyout. The lawsuit
- which is seeking class-action status - maintains that the
$13.65 per share offered sharply underestimated the company's
"By engaging in the going private transaction now - in the
midst of the company's transition from a PC vendor to full
service software and enterprise solution provider - the board is
allowing defendants M. Dell and Silver Lake to obtain Dell on
the cheap," read the lawsuit filed by Catherine Christner.
Dell, the world's No. 3 personal computer maker, broke down
details of the equity and debt financing secured for the buyout
in Wednesday's filing.
Silver Lake is putting up $1.4 billion, while banks
including Bank of America, Barclays, Credit
Suisse and RBC will provide roughly $16
billion in term loans and other forms of financing.
Wednesday's filing also disclosed that under certain
circumstances if the merger cannot be completed, Michael Dell
and Silver Lake could have to pay a termination fee of up to
$750 million to the company.