Breakdown of Dell's deal...

Following Michael Dell's decision to make his company private, we breakdown Dell's US$24.4 billion deal.

The definitive merger agreement is in partnership with technology investment firm Silver Lake, who will acquire the company.

Under the terms of the agreement, Dell stockholders will receive $13.65 in cash for each share of Dell common stock they hold, in a transaction valued at approximately $24.4 billion.

The price represents a premium of 25% over Dell’s closing share price of $10.88 on January 11, the last trading day before rumours of a possible going-private transaction were first published in the press.

A premium of approximately 35% has been offered over Dell’s enterprise value on the same date, with a premium of roughly 37% over the average closing share price during the previous 90 calendar days before the speculation.

The buyers will also acquire for cash all of the outstanding shares of Dell not held by founder and CEO Dell and certain other members of management.

“The Special Committee and its advisors conducted a disciplined and independent process intended to ensure the best outcome for shareholders," said Alex Mandl, lead director, Dell’s Board of Directors.

"Importantly, the go-shop process provides a real opportunity to determine if there are alternatives superior to the present offer from Mr. Dell and Silver Lake.”

The merger agreement provides for a so-called “go-shop” period, during which the Special Committee will actively "solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals."

Hmmm, keeping up?

The initial go-shop period is 45 days but following that period, the Special Committee can continue discussions and enter into or recommend a transaction with any person or group that submitted a qualifying proposal during the 45-day period.

Yawn.

A successful competing bidder who makes a qualifying proposal during the initial go-shop period would bear a $180 million (less than 1%) termination fee.

But for a competing bidder who did not qualify during the initial go-shop period, the termination fee would be $450 million.

Following completion of the transaction, Dell, who owns approximately 14% of the company's common shares, will continue to lead the company as chairman and CEO.

The transaction will be financed through a combination of cash and equity contributed by Dell, cash funded by investment funds affiliated with Silver Lake, a cash investment by an investment fund affiliated with MSDC Management, L.P., a $2 billion loan from Microsoft, rollover of existing debt, as well as debt financing that has been committed by BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets (in alphabetical order), and cash on hand.

The transaction is expected to close before the end of the second quarter of Dell’s FY2014.