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Dell privatization finalized, includes $2B Microsoft loan

updated 11:15 am EST, Tue February 5, 2013

Michael Dell remains CEO, becomes majority shareholder

Dell is being withdrawn from public sale and will become a privately held company. A definitive merger agreement signed today sees company founder, chairman, and CEO Michael Dell partnering with technology investment firm Silver Lake to acquire the company. The transaction is valued at approximately $24.4 billion.

The terms of the agreement will provide Dell stockholders $13.65 in cash per share of common Dell stock held, the price itself representing a premium of 25 percent over Dell's closing share price on January 11th of $10.88, the day before rumors of the transaction began. Dell himself will continue as chairman and CEO, courtesy of his existing shares and an additional investment estimated at around $700 million, which also gives him the majority stake in the company.

The rumored contribution of $2 billion from Microsoft is also confirmed, with a statement from the software giant saying it is "committed to the long term success of the entire PC ecosystem and invests heavily in a variety of ways to build that ecosystem for the future." It is unclear if there is any ulterior motive for Microsoft's loan, though it has been suggested by The Verge that it could have something to do with Dell's ownership of more-than 2,400 patents, as well as possibly preventing Dell from moving into Android and Chrome OS markets.

At present, Dell's market capitalization stands at approximately $23 billion, reduced from $100 billion by a combination of changing market conditions and ongoing economic struggles. Despite this, Dell still manages to haul in around $3 billion in clear profit annually.

The deal itself is subject to regulatory approval, and is expected to close by the second quarter of Dell's 2014 financial year. The involvement of Michael Dell in the deal could prolong the deal closure, as it may be seen as stock price manipulation by regulators, and therefore require greater scrutiny. Bond analyst for Legal and General Stanley Martinez believed that the "timing and valuation could be exceptionally clever" before the buyout attempt, noting that the stock price at the time had dropped nearly 39 percent over a five-year period.

by MacNN Staff



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