There had been already rumors for several weeks and yesterday the news became official: Michael Dell (photo ©mikeandryan), founder and CEO of Dell Inc., buys his company back along with equity firm Silver Lake and the participation of Microsoft with $2 billions. The acquisition amounts to a total of $24.4 billions.
Michael Dell founded his company in 1984 and within a few years he had great success selling them directly rather than through a network of resellers. In 1988, Dell began to expand globally making it one of the largest PC manufacturers in the world and went public.
After years of success, Michael Dell preferred to leave his office of CEO but the company sales growth slowed down over time and the value of the shares went down a lot. Competition from mobile devices became greater and greater and despite some acquisitions the situation seemed to get worse and worse.
In 2007, Michael Dell returned to being the CEO of Dell Inc. but regarded the shareholders as a burden. Since then, his intention was to make company he founded private again and now he seems to have done it. Under the agreement, shareholders will receive $13.65 per share, a price 25% higher than the $10.88 they had on January 11, 2013, the last trading day before the rumors of this agreement started spreading.
In 1998, Michael Dell created his own private equity firm MSD Capital L.P. and part of the money for the purchase will come from it. Silver Lake, another equity firm, Microsoft and the banks Bank of America, Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets are the other partners. A transaction so big he can’t be completed in a short time, in fact it’s expected to be completed before the end of the second quarter of Dell’s fiscal year 2014.
Inevitably, it will take some time to figure Michael Dell’s plans to bring his company back to its past glory. We’ll also have to see how much influence Microsoft will have and how it will be exercised. The company currently run by Steve Ballmer is seeking deals with major partners because it’s having problems too.
Together with Dell, Microsoft can hope to be a stronger competitor for Apple and Google but might also want to influence Dell’s choices about Linux. For some years, Dell has been offering various solutions for Linux desktops and servers and even if Microsoft’s attitude towards the operating system of the penguin has changed in recent years it’s still a rival.
Surely, now that Dell no longer has to answer to shareholders and hysteria of the stock market, its founder Michael Dell may establish plans in the medium and long term. We have just to wait to see major changes.