Dell secures $24.4B LBO deal
And so it has come to pass.
As Dell bond holders quake, the firm has inked a deal to effect an LBO at $13.65 a share, making the transaction worth a whopping $24.4 billion. The company will now start a go-shop process, but the chances of a meaningfully better bid are not good.
The fact that the founder of the company is actively investing (rolling over his existing stake and contributing even more personally) in the deal--and let's not forget Microsoft's participation--will make it hard for other sponsors to step up to the plate and compete with Silver Lake.
What we'll likely end up with is one of the largest transactions since the financial crisis. Blackstone Group led a $26 billion leveraged takeover of Hilton Hotels in the 2007. The scrutiny will be intense, and fairly or not, people will see it as a litmus test of sorts for the viability of the private equity model. If Dell can resurrect itself, the model will be hailed. If not, it will be seen as a sign that the traditional buyouts are growing more anachronistic by the year.
As noted by the Financial Times, Dell's board was advised by JPMorgan and Evercore and Debevoise & Plimpton. Dell was advised by Goldman Sachs and Hogan Lovells. Michael Dell was advised by Wachtell, Lipton, Rosen & Katz. Silver Lake was advised by the same four banks providing financing, that is, Barclays, RBC, Bank of America and Credit Suisse.
The likelihood of a deal had Dell bondholders jumpy. Possible downgrades are now on the way, even as the company prepares to dump more debt on the market.