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Michael Dell and Microsoft are in final stages of $23bn buyout

Dell is set to go private
Tue Feb 05 2013, 11:50
Dell's inaugural European Storage Forum in London

DESKTOP AND LAPTOP PC FLOGGER Dell is closing in on a $23bn deal to exit the stock market and become a privately held company, according to the Wall Street Journal.

Company founder Michael Dell is set to use his own money to complete the transaction. His holding will be combined with cash from Microsoft and private equity firm Silver Lake Partners to buy out the firm's investors.

The deal will see Dell stockholders receive anywhere from $13.50 to $13.75 a share. That quote represents an increase from Dell's recent share price of $13.27.

Dell founder Michael Dell will contribute over $3.7bn of his own holdings to the buyout. His assets will be added to funds from Microsoft, Silver Lake Partners and four private banks.

While the deal is still in process, it has yet to be seen if Dell shareholders will accept the buyout. According to the Wall Street Journal's sources, the deal might be attractive to investors because of the overall trends in the PC market.

Recent studies have found that the PC market has lost a great deal of ground to the consumer demand for tablets. According to Gartner, PC sales dropped nearly five per cent in the fourth quarter of 2012.

Analysts have told The INQUIRER that going private will be a good move for Dell. Principal analyst at research firm Pund-IT Charles King said that the move will end the constant scrutiny that Dell has received on Wall Street.

"I'm positively disposed to the idea of Dell going private. The company is well run, profitable and moving forward with what has been a successful reorganisation/refocus on end to end business computing," King said.

"Despite that, Dell has received more second guessing than love from shareholders and analysts. Going private would allow the company to keep doing what it knows best without worrying about the market's reaction."

Patrick Moorhead, principal analyst at Moor Insights and Strategy, also pointed out that going private wouldn't be the end all for Dell. Moorhead told The INQUIRER that he expects Dell to return to Wall Street in three to five years.

"When you look at what Wall Street and the public markets are valuing Dell at right now, there isn't a lot of downside to going private," said Moorhead.

"Dell wouldn't remain private, however, and would likely emerge back on the public scene after they have made it through their entire enterprise transition which could take three to five years."

The analysts also say the deal is interesting because of Microsoft's involvement. According to Moorhead, the Redmond company's involvement most likely came with certain stipulations that will see Dell work closely with the software house.

"Microsoft is interested in keeping a very focused partner in Dell, and Microsoft's potential investment does just that," continued Moorhead.

"Dell would likely need to commit to certain Microsoft programs to get the investment, but Dell won't agree to anything that limits their future growth."

Talk of Dell going private has been around since 2010. In November 2010, Dell's CFO said in an interview said that the company had considered going private. µ


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