Dell Confirms Plan to Go Private in $24.4 Billion Buyout Deal

Michael Dell, the founder of the computing and technology company that bears his name, confirmed today that he intended to buy it back from shareholders. In a deal announced this morning, Dell and Silver Lake Partners will buy out the company’s existing shareholders in a transaction worth $24.4 billion.

The deal values Dell at $13.65 a share, amounting to a 25.5 percent premium over the closing price of $10.88, where Dell was trading on Jan. 11 before the first reports of renewed interest in a buyout transaction emerged.

The deal also brings together private equity fund Silver Lake with software giant Microsoft, and represents the latest step in a relationship that began when Microsoft bought out Skype for $8.5 billion in 2011.

The deal includes a $2 billion loan from Microsoft.

Microsoft confirmed its participation in the deal in a statement:

Microsoft has provided a $2 billion loan to the group that has proposed to take Dell private. Microsoft 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. “We’re in an industry that is constantly evolving. As always, we will continue to look for opportunities to support partners who are committed to innovating and driving business for their devices and services built on the Microsoft platform.”

Other financing is coming from Silver Lake; Michael Dell’s personal investment company, MSD Capital; the rollover of existing debt; and financing contributed by Bank of America/ Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets, plus Dell’s cash on hand, which stood at about $11.3 billion as of Nov. 1.

Michael Dell will remain as chairman and CEO.

The deal provides for a 45-day go-shop period, during which the company will seek to find a superior offer, but given the size of the deal, don’t expect there to be any takers. Investment bank Evercore Partners will run the go-shop process, and had advised the special committee of Dell’s board of directors that has been exploring options for the company.

Dell shares were halted as the markets opened for trading in New York this morning.

Dell has been trying to transform itself from what was once the world’s foremost PC maker into a company known more for a diverse portfolio of enterprise IT hardware, software and services. It has sought to do this mostly by way of acquisitions, about $13 billion worth since 2008.

A recent example is last year’s $2.4 billion deal for Quest Software, which it won after a complex on-again off-again bidding war with private equity fund Insight Venture Partners.

In addition to acquisitions, Dell has been beefing up its executive ranks on the enterprise side of the business. Last year, Dell hired Marius Haas, the former head of networking at Hewlett-Packard, to run its enterprise division, and John Swainson, the former CEO of IT services company CA, to run its software unit.

And while the enterprise side of the business has been growing, it hasn’t been doing so fast enough to make up for the ongoing decline in PC sales that has ravaged that industry.

Indeed, despite Dell’s best efforts to move away from PCs, the percentage of its revenue that is either derived directly from sales of PCs to consumers and corporations, and of sales of PC-related peripherals like monitors, still amounts to 70 percent.

Here’s the original announcement that just crossed the wires: