Dude, Dell's going private.
Texas-based computer maker Dell Inc. announced Tuesday that it has agreed to be sold to a group led by company founder Michael Dell and technology-focused investment firm Silver Lake. Once completed, the $24.4 billion transaction would be the largest leveraged buyout since the economic crisis began.
Hogan Lovells is advising Dell on the deal, while Wachtell, Lipton, Rosen & Katz is representing the company's namesake CEO, and Simpson, Thacher & Bartlett is serving as Silver Lake's outside counsel.
The investment group buying Dell the world's third-largest producer of personal computers behind Hewlett-Packard and Lenovo has agreed to pay $13.65 in cash for each of the company's shares. The price represents a 25 percent premium over Dell's closing price on January 11, the day before rumors that a going-private transaction was in the works hit the market.
Michael Dell, who founded the PC maker in 1984 out of his University of Texas dorm room, will contribute his 14 percent stake in the company to the transaction and continue to serve as chairman and CEO. He will also put up additional cash, while Silver Lake will contribute roughly $1 billion, according to The New York Times. Microsoft Corp. is also involved on the buying side, contributing a $2 billion loan to help finance the purchase.
Michael Dell first approached the company's board last August about the possibility of taking Dell private, according to the official announcement of the deal. In an article published Tuesday, Bloomberg BusinessWeek's Ashlee Vance explored the Dell CEO's likely reasoning for pursuing the sale, including his desire to reinvent a company struggling to compete with both its PC-making rivals and competitors selling smartphones and tablets. The Times, meanwhile, notes that Microsoft's involvement suggests that the software giant one of Dell's main business partners has its own concerns about the company's future.
The proposed transaction, which has the support of a special committee of Dell's board of directors, is expected to close before the end of the second quarter of Dell's 2014 fiscal year, pending the approval of regulators and the company's shareholders.
The agreement includes a provision allowing for a 45-day "go-shop" period during which the special Dell committee can actively seek better bids. Should an agreement be struck with a rival bidder during that period, that bidder would be required to pay the group led by Michael Dell and Silver Lake a $180 million termination fee. If an alternate deal is made after the go-shop period ends, the competing bidder would have to come up with a $450 million breakup fee. The go-shop period will be overseen by Evercore Partners, which, along with J.P Morgan, is acting as financial adviser to the special committee.
A Wachtell team led by corporate partners Martin Lipton and Steven Rosenblum is advising Michael Dell on the buyout. Corporate partners Andrew Nussbaum and Gordon Moodie are also advising, as is antitrust partner Joseph Larson, executive compensation and benefits partner Michael Segal, restructuring and finance partner Joshua Feltman, tax partner T. Eiko Stange, and litigation partners John Savarese and William Savitt. The Wachtell associates working on the deal are Victor Goldfeld, Kendall Fox, Sara Lewis, Gregory Pessin, and Tijana Dvornic.
Wachtell represented Michael Dell three years ago in connection with a $100 million settlement his company reached with the Securities and Exchange Commission concerning improper accounting and disclosure violations.
For its part, Silver Lake is being represented by a Simpson Thacher team led by Palo Altobased M&A partners Richard Capelouto and Chad Skinner. Capital markets partners William Brentani, Michael Nathan, and John Lobrano are also advising, as are credit partner Jennifer Hobbs, structured finance partner Laura Palma, employee benefits partner Tristan Brown, antitrust partner Joseph Tringali, IP partner Jeffrey Ostrow, regulatory partner Stacie McGinn, antitrust senior counsel Michael Naughton, environmental senior counsel Michael Isby, IP counsel Joshua Walker, and real estate counsel Krista McManus. Partners John Creed and Katharine Moir, along with associate Jason Vollbracht, are advising on tax matters.
Simpson Thacher has had a hand in a number of Silver Lake deals in recent years, including the purchase of a controlling stake in The Go Daddy Group by a consortium that included Silver Lake in 2011. (The value of that deal was not disclosed.) In 2010, Simpson Thacher represented another investing consortium that included Silver Lake in connection with that group's purchase of financial market data provider Interactive Data Corporation for $3.4 billion.
Other Simpson Thacher associates working on the deal are Atif Azher, M. Nicholas Washburn, Kathleen Edwards, Jonathan Amt, Brian Osimiri, Erica Wilson, Dena Acevedo, David Ray, Alexander Coffin, Alexis Orenstein, Seth Niedermayer, Jason Vollbracht, Jennifer Wolff, Grace Wirth, David Shogren, Jane Lee, Mindy Lok, Jodie Pimentel, Michael Hasper, Roxana Niktab, Samantha Himelman, Emiko Kurotsu, and Michelle Lyon.
Silver Lake's general counsel is former Ropes & Gray attorney Andy Schader.
Sullivan & Cromwell corporate partner Alison Ressler, meanwhile, is leading a Los Angelesbased team from the firm advising Microsoft, along with corporate special counsel Lisa Murison and associate Gideon Rov. New Yorkbased partner David Spitzer and associate Theodore Holt are providing tax advice.
The special committee of Dell's board has hired Debevoise & Plimpton as its outside legal counsel. The Debevoise team is led by corporate chair Jeffrey Rosen and corporate partners William Regner and Michael Diz. Executive compensation and employee benefits chair Lawrence Cagney is also advising on the matter, along with tax partner Peter Furci, antitrust partner Gary Kubek, finance partner Pierre Maugüé, and corporate partner Jeffrey Ross. (Debevoise advised Dell in 2010 when the company made an unsuccessful run at acquiring 3PAR Inc., a data storage company that eventually agreed to a deal with HP.)
The company itself has enlisted the help of Hogan Lovells for advice on the sale. The firm's team is led by securities partners Richard Parrino and Kevin Greenslade, in Washington, D.C., and Northern Virginia, respectively. Also advising: securities partner Joseph Connolly Jr.; finance partners Bruce Gilchrist, Eve Howard, and Peter Humphreys; employee benefits partner Margaret de Lisser; corporate partners Carine Stoick and Brent Singley, as well as corporate counsel Miyun Sung; government contracts partner Todd Overman; and labor partner Dominique Mendy.
The Hogan Lovells associates working on the matter are Todd Aman, Evan Kelson, David Cohn, Clyde Crane IV, Gabrielle Witt, Theresa Nagy, Michael Belby, Brandon Egren, Tyler Kirtley, Nicholas Nugent, and Adam Aft.
Dell's general counsel is former O'Melveny & Myers partner Lawrence Tu.
New York-based Weil, Gotshal & Manges corporate partner Michael Aiello is leading a team from that firm advising Evercore in its role as the special committee's financial adviser. Weil's corporate team also includes partner Matthew Gilroy and associates Frank Martire and Damali Peterman.
(According to a Weil press release, the firm's team on the matter does not include Silicon Valley M&A partners Richard Climan and Jane Ross, both of whom previously advised Dell on multiple transactions during their tenure at the now-defunct Dewey & LeBoeuf before joining Weil last May. Aiello himself is a former partner at Dewey & LeBoeuf predecessor firm Dewey Ballantine.)
Davis Polk & Wardwell also landed a role on the Dell buyout, with corporate partner Alan Denenberg leading a team representing J.P. Morgan Securities in its role as the other financial adviser, along with Evercore, to the special committee of Dell's board. Other Davis Polk attorneys on the deal are: litigation partner Neal Potischman, credit partner Sartaj Gill, tax partner Neil Barr, compensation and benefits counsel Cynthia Akard, and corporate associate Stephen Salmon.
Dude, Dell's going private.