Michael Dell To Use Personal Fortune For Buyout

Dell founder and CEO Michael Dell is reportedly planning to spend as much as $1 billion (£630m) of his own personal fortune in order to retain control of the tech vendor, if it goes private.

According to unnamed sources quoted by Bloomberg, Dell already owns 15.7 percent of the company, which has been hammered in recent quarters by the downturn in the global PC market while it tries to transition to more of an enterprise IT solutions provider.

Dell Buyout

Reports have been circulating in the past few weeks that Dell executives are considering a leveraged buyout that would take the company private and give it greater flexibility as it moves forward with its transformation.

Some of the names circulated as key players in the plan to take Dell private are not only equity firms like Silver Lake Management, but also software giant Microsoft, which could invest as much as $1 billion (£630m) or more in the deal. According to the Bloomberg report, Michael Dell would combine his current 15.7 percent stake with another $500 million (£316m) to $1 billion of his own money to retain control of the company, which currently is the world’s third-largest PC maker.

According to reports, Dell’s contribution would push his stake in the company past the 50 percent mark, with Silver Lake and Microsoft investing $1 billion (£13.9bn) to $2 billion (£1.27bn) apiece.

The deal reportedly would put the price for Dell in the $22 billion to $24 billion (£15.2bn) range, the largest leveraged buyout since before the global recession hit several years ago, according to analysts.

Dell has created a subcommittee of the board of directors to investigate the options facing the company. Among those options is selling to other buyers, sources told Bloomberg. They said that Evercore Partners, which is advising the subcommittee, has spoken with other potential buyers, though no other bids have been made.

Outside Scrutiny

It could take time for a deal to be reached, according to sources speaking to The Wall Street Journal. They told the newspaper earlier this week that issues surrounding Microsoft’s possible participation in the deal were being discussed, in particular the degree to which Microsoft would have a say in how Dell would be run. That’s an important issue, given that Dell sells a lot of computers with Microsoft’s Windows operating system inside. What needs to be determined is to what extent Microsoft’s owning part of Dell would affect their partnership, the sources said.

The key advantage for taking the company private would be enabling Michael Dell and other company executives to continue remaking the company outside the glare of Wall Street that comes with being a public company. They no longer would feel the pressure of the quarterly earnings reports, and they would be afforded much wider latitude in making significant decisions about Dell’s future, such as whether to shed the PC business, according to analysts.

In an interview with The Journal, Microsoft CEO Steve Ballmer would not comment on Dell in particular, but acknowledged the changes in the computing industry and said that Microsoft wants “all of our OEM customers to be as strong as they can possibly be.”

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Originally published on eWeek.