Michael Dell Valued His Shares Below Market Price in LBO

Dell Inc. founder Michael Dell valued his stock rolled into a $24.4 billion buyout of the computer maker at $13.36 apiece, less than the $13.65-a-share price offered to common shareholders.

After Michael Dell approached the board last August to propose going private, three financial firms were permitted to conduct due diligence by a special committee of the board, the Round Rock, Texas-based company said in a regulatory filing.

Silver Lake Management LLC, and one other private equity firm separately submitted bids to the committee that proposed teaming up with Michael Dell to acquire the company, according to the filing. After the other firm dropped out, Dell agreed to value his shares at less than the transaction price to help convince Silver Lake to increase its initial offer.

After six months of talks, Michael Dell and Silver Lake said on Feb. 5 that they agreed to take the personal-computer maker private in the largest leveraged buyout since the financial crisis. Since then, the transaction has drawn opposition from Dell’s biggest outside shareholders, Southeastern Asset Management and T. Rowe Price Group Inc., who say the deal undervalues the company.

Alternatives Reviewed

A majority of shareholders, excluding Michael Dell, must approve the transaction, a prospect that’s diminishing as the opposition gains momentum. Dell’s stake is about 14 percent.

Michael Dell is seeking to take back majority control of the company he founded in 1984 after losing ground in the PC market and as consumer demand shifted to tablets from competitors, including Apple Inc. Dell, the No. 3 maker of PCs, lost almost one-third of its value in 2012 as mobile and cloud computing diminished the need for PCs.

The special board committee reviewed several alternatives to going private, including a possible sale of Dell’s PC support and financial services businesses, according to the filing. Changing the dividend policy and accelerating acquisitions were also considered.

Dell’s shares retreated less than 1 percent to $13.71 at the close in New York.

To contact the reporter on this story: Lisa Rapaport in New York at lrapaport1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Dell Inc. founder Michael Dell

Tony Avelar/Bloomberg

Michael Dell is seeking to take back majority control of the company he founded in 1984 after losing ground in the PC market and as consumer demand shifted to tablets from competitors, including Apple Inc.

Michael Dell is seeking to take back majority control of the company he founded in 1984 after losing ground in the PC market and as consumer demand shifted to tablets from competitors, including Apple Inc. Photographer: Tony Avelar/Bloomberg

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Feb. 6 (Bloomberg) -- John Sculley, former chief executive officer of Apple Inc., and Shannon Cross, analyst at Cross Research, talk about Dell Inc.'s decision to go private in a deal valued at $24.4 billion, undertaking the biggest leveraged buyout since the financial crisis. They speak with Tom Keene and Sara Eisen on Bloomberg Television's "Surveillance." Joseph Weisenthal, deputy editor of Business Insider Inc., also speaks. (Source: Bloomberg)