Dell Technologies to buy out VMWare tracking stock
Dell Technologies to buy out VMWare tracking stock
Michael S Dell seen here playing Michael Barrymore is set to become even richer
03 July, 2018, 03:52
The remainder of the consideration for the VWWare tracking stock holders will be financed with common equity in Dell, which will remain a private company, the people said. The $21.7 billion deal, announced Monday, was approved by the boards of Dell and VMware Sunday night.
Dell is taking a nontraditional route to the public markets, eschewing an initial public offering of stock in favor of the conversion of a "tracking stock" that the company already has listed on the New York Stock Exchange.
Dell bought EMC in 2016 for $67bn, gaining a dominant position in enterprise storage and hyper-converged infrastructure systems.
Meanwhile, VMware will issue an $11 billion dividend, with $9 billion going to Dell.
The transaction will allow Dell to bypass the traditional IPO process, which would likely have involved grilling by stock market investors over its $52.7 billion debt pile.
Michael Dell now owns 72 percent of common shares in Dell, while Silver Lake owns 24 percent. While the tracking stock that would facilitate the change has doubled in value, Michael Dell has previously stated a preference for being a private company - which Dell has been since 2013.
The shares that track its interest in VMware Inc. jumped 8 per cent in early trading.
A tracking stock is a type of common stock that "tracks" or depends on the financial performance of a specific business unit or operating division of a company rather than the operations of a company as a whole. Alternatively, VMware shareholders could opt for $109 in cash. DVMT shares rose 5.5 percent to $155.11.
The tracking stock has almost doubled in value since it was issued, closing Friday at $84.58.
"Unprecedented data growth is fueling the digital era of IT, and we are uniquely positioned with our portfolio of technologies and services to enable the digital, IT, security and workforce transformations of our customers", Dell said in a prepared statement on Monday. Until now, investors have gained exposure to Dell by purchasing shadows of shadows of the company. Dell had been exploring a reverse merger earlier this year. "And we're seeing tremendous momentum inside the business", Michael Dell told analysts on a conference call.
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