A regulatory document filed with the U.S. Securities and Exchange Commission on Wednesday revealed that private-equity firm Silver Lake invested up to $1.4 billion USD in the leveraged buyout of Dell. Company CEO and founder Michael Dell also dumped $500 million of his own cash – in addition to his 273 million shares worth $3.73 billion – into the deal. Microsoft even stepped in and loaned out $2 million while the Dell family's $12 billion investment fund, MSD Capital, added another $250 million in cash.
According to the agreement, Dell will be required to pay either $180 million or $450 million to the buyer group if it accepts a bid from another buyer. The agreement also allows the company to take buyers to court in certain circumstances to force the completion of a transaction, or to enforce a $750 million fee instead.
Currently Michael Dell and Silver Lake are offering $13.65 per share to stockholders, 25-percent more than the closing price on January 11. Michael Dell also said in the filing that he would “explore in good faith the possibility of working with any third parties regarding alternative acquisition proposals", but only if the board or its four-member special committee requests it.
Michael Dell is reportedly trying to secure $13.8 billion in loans, via Bank of America, Barclays, Credit Suisse Group and Royal Bank of Canada, to support the leveraged buyout. The loans will consist of a $4 billion term B, a $1.5 billion term C, a $2 billion portion backed by his assets, and $3.25 billion of bridge facilities. Also included is a $1.9 billion commercial receivables portion and a $1.1 billion revolving consumer receivables facility.
The filing also reveals that Dell's special committee, along with its adviser Evercore Partners, will have 45 days to "go shop" for other potential buyers. If the company finds and accepts another bid outside the current buyer group, it must pay a $180 million termination fee during that period, or $450 million after the 45-day period ends.
The deadline to complete the leveraged buyout has been set for November 5, and is contingent on approval by a majority of shareholders. Several shareholders have already protested against the deal, saying that there's a lack of specifics, and a potential conflict of interest with Michael Dell himself given that he has a 16-percent stake in the company. Some call it a "raw deal", and one shareholder is actively trying to stop the buyout through a class-action lawsuit filed in Delaware.
According to the lawsuit, the $13.65 per share offered by the buying group "sharply underestimates" the company's long-term prospects. "By engaging in the going private transaction now - in the midst of the company's transition from a PC vendor to full service software and enterprise solution provider - the board is allowing defendants M. Dell and Silver Lake to obtain Dell on the cheap," stated the lawsuit filed by Catherine Christner.
Despite rumors of a strict Microsoft cracking the whip on Dell to keep it focused on Windows and the consumer sector, executives said earlier this week that Dell will continue to focus on becoming a provider of corporate computing services. The company did not make any comments about spinning off the consumer PC business that originally put Dell on the PC map.
