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Dell Inc. (NASDAQ:DELL): Current Price: $13.40
The company signed a definitive merger agreement under which Michael Dell, Dell’s founder and CEO, in partnership with investment firm Silver Lake, is acquire Dell. Under the terms of the agreement, Dell stockholders are to gain $13.65 in cash for each share of Dell common stock they hold, in a transaction worth nearly $24.4 billion. The buyers are to gain of the outstanding shares of Dell stock that is not held by Mr. Dell and certain other members of management.
This action is due to the recommendation of a special committee of independent directors that unanimously approved a merger agreement. The merger agreement provides for a so-called “go-shop” period, during which the Special Committee with the assistance of Evercore Partners are to actively solicit, receive, evaluate, and potentially enter into negotiations with parties offering alternative proposals.
The initial go-shop period is 45 days. A successful competing bidder making a qualifying proposal during the initial go-shop period is expected to bear a $180 million termination fee. For a competing bidder not qualifying during the initial go-shop period, the termination fee would be $450 million. After the transaction is complete, Mr. Dell, owner of 14 percent of Dell’s common shares, is to keep his role as CEO and will keep a significant equity investment in Dell by contributing his shares of Dell to the new company, along with making a substantial additional cash investment.
The transaction will be financed via a combination of cash and equity contributed by Mr. Dell, cash funded by investment funds affiliated with Silver Lake, cash invested by MSD Capital, a $2 billion loan from Microsoft, rollover of existing debt, and debt financing that was committed by Bank of America Merrill Lynch, Barclays, Credit Suisse, and RBC Capital Markets, and cash on hand. There is no financing condition. The transaction will likely close prior to the conclusion of Q2 of Dell’s FY14.
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