Dell (NASDAQ: DELL) has agreed to go private in a deal with company founder Michael Dell and investment firm Silver Lake Partners, as the company tries to reduce its dependence on the slumping market for personal computers.
The Texas-based PC maker once topped a market capitalisation of US$100 billion as the world's largest PC maker. It is now ranked number three, behind Hewlett-Packard (HP) and Lenovo.
Analysts have suggested the deal may give the company a chance to regain some footing in a market in which smartphones and tablets are overtaking laptop and desktop computers.
Shareholders will receive $13.65 in cash for each share, valuing the company at $24.4 billion. The price is a 37% premium over three-month average share prices, and a 25% jump from closing prices on Jan. 11. That's when rumours of a possible deal emerged; pushing share prices 20% higher overnight.
The transaction relies on a complex network of financing sources, including funds from Mr Dell's private assets, loans provided by four global banks, and a $2 billion loan from Microsoft (NASDAQ: MSFT) . In a statement, Microsoft said 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."
Shareholders must still approve the agreement, and the deal has to pass all the regulatory reviews of a normal merger agreement. Moreover, the board of directors will "actively solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals" during a 45-day "go-shop" period.
The deal is expected to close by the end of Dell's second fiscal quarter, which falls at the beginning of August this year.
Dell said that following completion of the transaction, Mr Dell, who owns about 14% of Dell's common shares, will continue to lead the company as chairman and CEO.
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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned.
A version of this article was originally published on fool.com. It has been updated by Mike King.
