Dell Negotiations Broke Up Several Times over Pricing

Michael Dell, who founded Dell Inc. way back in 1984 made a proposition to the board of the computer company in last August for going private. He also stated to the board that he is the correct person to do so, as far as sources familiar to the matter are concerned. After this proposition was made, serious negotiations started and according to sources, the code name for the potential deal is Mr. Denali. The discussions have broken up several times over the price, particularly in the final weeks of this deal. The initial offering was of $12 per share; however, the same ultimately went ahead to $13.65 per share.

The negotiation lasted for around 6 months and finally Michael Dell and Silver Lake Management LLC, the private equity firm decided to buy out the company marking the biggest leveraged buyout in last 6 years. Incidentally, the leveraged buyouts are generally initiated by the LBO firms, however, in this case, things started with Michael Dell’s proposition. According to analysts, through this deal, Michael is trying to ensure his legacy and reinvent the company which is currently struggling. As stated by the Chief Financial Officer of Dell Inc., Brian Gladden, Michael Dell is a person who is completely committed to his positions of Chief Executive Officer and Chairman. Gladden also commented that Michael is putting huge capital amount into the process.

For the last 52 weeks, the shares of Dell have been traded within the range between $8.69 and $18.36. Incidentally, on today, the shares of Dell experienced an increase of 0.1% and are currently priced at $13.43 per share.

As part of deal, 14% stake of Michael will be contributed and the same has been valued of worth $3.4 billion. Apart from that, Michael will contribute another $700 million for this deal and therefore will become the major stakeholder in the company. For the buyout process, another $1.4 billion will be invested by Silver Lake. Microsoft Corp. is also expected to invest around $2 billion for the deal, according to sources. The remaining $13 billion will be sourced through banks.

The deal has been finalized despite JPMorgan’s advice against it. The bank officials stated that such a deal will cause a probable conflict of interest with management responsibilities and it is actually to be seen that what’s in store for Dell Inc.

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