Slumping personal computer maker Dell is bowing out of the stock market in a $24.4 billion buyout that represents the largest deal of its kind since the Great Recession dried up the financing for such risky manoeuvrs.
The complex agreement announced Tuesday will allow Dell's management to attempt a company turnaround away from the glare and financial pressures of Wall Street. Dell stockholders will be paid $13.65 per share to leave the company on its own.
That's better than $11 level the stock was hovering at before word of the buyout talks trickled out last month, but a steep markdown from the shares' price of $26 less than five years ago.
Once the sale to a group of investors that includes investment firm Silver Lake is finalized, Dell's stock will stop trading on the Nasdaq nearly 25 years after the Round Rock, Texas, company raised $30 million in an initial public offering of stock. Microsoft Corp. is investing in the deal with a $2 billion loan.
The company will solicit competing offers for 45 days.
The IPO and Dell's rapid growth through the 1990s turned its eponymous founder Michael Dell into one of the world's richest people. His fortune is currently estimated at about $16 billion . Michael Dell, who owns nearly 16 per cent stake in the company, will remain the CEO after the sale closes and will contribute his existing stake in Dell to the new company.
Dell's sale is the highest-priced leveraged buyout of a technology company, surpassing the $17.6 billion paid for Freescale Semiconductor in 2006.
The deal is the largest leveraged buyout of any type since November 2007 when Alltel Corp. sold for $25 billion to TPG Capital and a Goldman Sachs subsidiary. Within a few months, the U.S. economy had collapsed into what would be its worst recession since World War II.
Leveraged buyouts refer to deals that saddle the acquired company with the debt taken on to finance the purchase.
Dell's decision to go private is a reflection of the tough times facing the personal computer industry as more technology spending flows toward smartphones and tablet computers. PC sales fell 3.5 per cent last year, according to the research group Gartner Inc., the first annual decline in more than a decade. What's more, more tablet computers are expected to be sold this year than laptops.
With just $1,000, Michael Dell started his company as PCs Limited in his dorm room as a freshman at the University of Texas at Austin. He would go on to revolutionize the personal computer industry by providing a way for companies and consumers to order custom-made machines at a reasonable price, first on the phone, then on the Internet.