A little more than two decades ago, Michael started a computer business in his college dorm room. His idea was rather simple, he would custom build entire computer systems for people using parts he purchased from manufacturers. This idea blossomed until it overtook his room, eventually his garage at home and finally to a larger building to handle the demand for his new computer building skills. The business grew and soon he had orders for thousands of new computers.
He hired skilled technicians to piece the sets together and that was right around the time that the internet experienced a boom in growth. When his computer company joined the New York Stock Exchange it was a proud moment for him and for those who worked for him. The influx of investor cash allowed Dell to become the company it is today, building computer systems and accessories for sale around the world.
With recent economic troubles affecting companies nationwide, it’s unusual to see a CEO push to take a company private. In other words, to withdraw from the New York Stock Exchange and forego any further investor influx of cash is a risky maneuver. But that’s just what Michael Dell and the Silver Lake Partners, an investment firm, are doing.
When word of this buyout came, the shares jumped almost 3% in value. Dell and Silver Lake Partners are purchasing Dell stock at $13.65 per share for a total of $24.4 billion dollars. Shareholders will get a 26% premium, the percentage over the current value of the stock shares and additional benefits as this was an all-cash offer on the table.
The offer, though exciting for existing stockholders is not favored by Dell Company second-largest shareholder, Carl Icahn. His plan involves keeping at least 40% of the company’s stock as publically traded and offered a buy out at $14.00 per share. This buyout offer from Icahn would involve adding $5.2 billion dollars in debt, using $7.5 billion in Dell’s cash reserves and selling $2.9 billion dollars in Dell’s receivables. Icahn is also putting up $5 billion of his own equity to finance their buyout plan.
Dell’s plan is to take it private and diversifying into several different companies, business software, data storage and consulting. Shareholders will be voting for one of the two options in their annual meeting on July 18th, 2013. The recent surge in http proxy list companies has caused a strain on a company built on personal computing.
Early indications are that it is Michael Dell’s offer that will be accepted, Icahn’s just involves too much debt and financing at a time where it is all a company can do to survive.
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