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Dell boosts company buyout offer

Dell boosts company buyout offer

Michael Dell's buyout offer for his company has been boosted by $500M, with shareholders expected to approve the new deal next month.

Michael Dell's bid to take his company private may go ahead after all, following a renegotiation which sees the value of the company's stock boosted to around $24.9 billion.

Dell's buyout bid was announced back in Feburary when the company founder confirmed rumours that an investment group - which includes cash from Windows creator Microsoft - had put together a bid to purchase the company's public stock and take it private for the first time since its initial public offering in 1992.

The move came as the global PC market continued to shrink and Dell's financial outlook worsened, but the company's investors believed the buyout hid a plan by Dell and his partners to bring the company back to growth - which would result in the bought-out investors missing out on a potentially substantial pay-day.

As a result, Dell saw considerable resistance from groups of shareholders opposed to the deal which saw the company valued at $24.4 billion - despite this representing a considerable premium on the company's $21.35 billion market capitalisation. At the time, Dell claimed that the offer would not be increased.

That's something his investment group has U-turned on, however, with the announcement that the buyout offer has now been increased from $24.4 billion to $24.9 billion - representing a ten-cent boost per share, and providing for a special dividend of $0.13 per share at or before closing along with guarantees regarding a $0.08 per share dividend.

'The Committee is pleased to have negotiated this transaction, which provides as much as $470 million of increased value, including the next quarterly dividend that will now be paid regardless of when the transaction closes,' claimed Alex Mandl, chair of the Dell Special Committee negotiating the buyout with the investment group.

The company's shareholders will vote on the revised offer next month, with initial indications suggesting that the founder will receive the majority approval he requires in order to seal the deal.

7 Comments

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will_123 5th August 2013, 09:45 Quote
That is a lot of moneys! What are the perceived benefits by becoming a private company? I actually cant stand dell hardware, from the rack all the way to the desktop I think it feels quite cheap! The rack mounts are flimsy and my work laptop is poor build quality.
Gareth Halfacree 5th August 2013, 10:03 Quote
Quote:
Originally Posted by will_123
That is a lot of moneys! What are the perceived benefits by becoming a private company?
The biggest thing is a reduction of risk. The stockmarket is a volatile thing: get some bad publicity - such as Dell has had recently, slipping down the market share ranks and watching its profits shrink thanks to declining consumer interest in traditional PCs - and your share price sinks, then the rest of your stockholders panic, then it sinks further, then before you know it you're filing for Chapter 11 bankruptcy protection just to keep the wolves at bay. If you're privately owned, you've still got investors to answer to - but a much smaller group, and they are usually in it for the long-haul. The acquisition contract will also usually include agreements that the investment group can't change its mind and cash out within a certain period of time, and can even include credit lines with investment companies - Dell might be able to get its hands on a large volume of Microsoft software licences without paying any cash up-front, for example, once Microsoft is a part-owner of the company.

There are disadvantages, of course: an investment group will hold considerable power over the company, and could potentially force Dell (the person) to do things he wouldn't otherwise do. It also makes it harder to raise additional funds: instead of just slicing another chunk off the company and floating more public stock, you need to renegotiate with your investment group.
will_123 5th August 2013, 11:19 Quote
Quote:
Originally Posted by Gareth Halfacree
The biggest thing is a reduction of risk. The stockmarket is a volatile thing: get some bad publicity - such as Dell has had recently, slipping down the market share ranks and watching its profits shrink thanks to declining consumer interest in traditional PCs - and your share price sinks, then the rest of your stockholders panic, then it sinks further, then before you know it you're filing for Chapter 11 bankruptcy protection just to keep the wolves at bay. If you're privately owned, you've still got investors to answer to - but a much smaller group, and they are usually in it for the long-haul. The acquisition contract will also usually include agreements that the investment group can't change its mind and cash out within a certain period of time, and can even include credit lines with investment companies - Dell might be able to get its hands on a large volume of Microsoft software licences without paying any cash up-front, for example, once Microsoft is a part-owner of the company.

There are disadvantages, of course: an investment group will hold considerable power over the company, and could potentially force Dell (the person) to do things he wouldn't otherwise do. It also makes it harder to raise additional funds: instead of just slicing another chunk off the company and floating more public stock, you need to renegotiate with your investment group.

Yes I had assumed it was basically to try and avoid the affects of public panic type thing, when share price does fall a bit. Wonder how it will go.
andrew8200m 5th August 2013, 11:43 Quote
You open with 24.9million not billion :) (end of first paragraph)
Gareth Halfacree 5th August 2013, 12:31 Quote
Quote:
Originally Posted by andrew8200m
You open with 24.9million not billion :) (end of first paragraph)
Whoops - sorry about that. Fixed now!
konstantine 5th August 2013, 15:16 Quote
And who owns Dell? Oh, another one from the tribe! Shalom..

Here's what an insider person from the tribe has to say about their role in our history, our catastrophes rather, since the early years of the 20th century:

http://www.youtube.com/watch?v=HhFRGDyX48c
thom804 5th August 2013, 21:50 Quote
Quote:
Originally Posted by konstantine
And who owns Dell? Oh, another one from the tribe! Shalom..

Here's what an insider person from the tribe has to say about their role in our history, our catastrophes rather, since the early years of the 20th century:

http://www.youtube.com/watch?v=HhFRGDyX48c

Keep this sorry crap in your own topic. This is an article about Dell, not your own personal agenda.
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