Michael Dell coughs up $750 mln cash to buy out Dell Inc

Feb 07 2013, 09:20 IST
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SummaryMichael Dell and his investment firm are ponying up $750 mn in cash toward $24 bn purchase.

Michael Dell and his investment firm are ponying up $750 million in cash toward the $24.4 billion purchase of Dell Inc to help bankroll the largest private equity-backed buyout since the financial crisis.

The Dell founder and CEO this week struck a deal to take private the company he created out of a college dorm room in 1984, partnering with private equity house Silver Lake and Microsoft Corp.

Michael Dell will contribute $500 million of his own cash, and MSDC Management - an affiliate of his investment vehicle, MSD Capital - will contribute another $250 million, according to a company filing on Wednesday.

Dell Inc also said it is targeting the repatriation of $7.4 billion of cash now parked abroad to help finance the deal. That may dismay some shareholders, as a hefty tax is usually levied on cash brought back from overseas.

The deal, which ends Dell's rocky 24-year run on the Nasdaq just as the once-dominant PC maker struggles to revive growth, is contingent on approval by a majority of shareholders -- excluding Michael Dell himself.

Several shareholders, including prominent investor Frederick "Shad" Rowe of Greenbrier Partners, have spoken out against the deal, protesting a lack of specifics as well as a potential conflict of interest with Michael Dell being the company's single largest shareholder with a roughly 16 percent stake.

"Some shareholders are glad. But there are others who feel it's a raw deal," said Shaw Wu, an analyst with Sterne Agee, who has spoken with several Dell shareholders since the announcement but declined to provide further details.


Dell was regarded as a model of innovation as recently as the early 2000s, pioneering online ordering of custom PCs and working closely with Asian suppliers and manufacturers to assure rock-bottom production costs. But it missed the big industry shift to tablet computers, smartphones and high-powered consumer electronics such as music players and gaming consoles.

Executives said on Tuesday the company will stick to a strategy of expanding its software and services offerings for large companies, with the goal of becoming a provider of corporate computing services - like the highly profitable IBM . They played down speculation the company may spin off the low-margin PC business on which it made its name.

The company has not given many specifics on what it would do differently as a private entity, angering some shareholders who said they needed more information to determine whether the $13.65-a-share deal

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