Mr. Dell, together with technology private equity investor, Silver Lake, will offer $13.65 cash per share.
The firm said it offered a 25% premium over the Dell’s valuation in January when rumours of the deal first broke.
The buy-out of the Nasdaq-listed firm will be financed by loans from four banks, and a $2bn loan from Microsoft.
Mr Dell, who is also chief executive and chairman of the firm, already owns about 14% of the company. He and fellow senior executives will retain their existing stakes.
Analysts said the move would give Mr. Dell greater flexibility in turning the company around, by dispensing with the need to deliver strong results every quarter to shareholders on the stock market.
The entrepreneur said that the firm’s long-term strategy would “still take more time, investment and patience, and I believe our efforts will be better supported by partnering with Silver Lake in our shared vision”.
“One of the key questions is going to be how much influence Microsoft is going to have over Dell’s strategy,” said Cindy Shaw, analyst at Discern Group.
Michael Dell founded the company – originally named “PCs Limited” – in 1984 at the age of 19, operating out of his dorm room in the University of Texas.
He later dropped out of university in order to develop his PCs, including innovative laptops, and to expand his business overseas.
But over the last decade, Dell has faced increasingly steep competition, from cheaper Asian PC manufacturers such as China’s Lenovo, and from innovative US rivals such as Apple whose tablets and smart phones have superseded the desktop and laptop.
The company appeared to lose its direction between 2004-07, when Mr. Dell stepped down from day-to-day management of the company, and has suffered a number of false starts since his return, including the unsuccessful launch of its “Streak” tablet computer in 2010.
Mr Dell first approached the board with a buy-out proposal in August, and news of the talks emerged in mid-January, propelling the company’s share price higher.
However, the share price still remains some way below the $17-$18 level it was trading at a year ago and well below its all-time high of just under $60 in 2000.
Completion of the buy-out, which will require shareholder approval, is far from agreed.
Before completing the deal, Dell’s board said it will conduct what it called a “go shop” period of 45 days during which it would actively seek competing offers to buy the firm at a better price.
Reprinted from BBCNews