Having drastically expanded Dell into a one-stop technology shop for businesses, Dell and his financial partner, the investment firm Silver Lake, plan to bring the company back to the public markets — even if in a complicated fashion.
Dell Technologies said it had struck a deal to buy out investors in a special class of shares created in 2016 to help Dell buy the networking company EMC. That stock effectively tracks the performance of Dell’s 82% stake in VMware (NYSE:DVMT), the network software powerhouse that Dell inherited when it bought EMC.
As part of the deal, VMware will pay DVMT shareholders an US$11bn special cash dividend and Dell will offer more shares, or cash, to make up the difference, giving a total deal size of US$21.7bn. Holders of DVMT shares, also known as Dell Technologies Class V, will have the option to either swap their shares for Dell’s Class C common stock, or take US$109 in cash per Class V share. The offer is a 29% premium to Class V’s closing price Friday. The deal is expected to close in the fourth quarter of 2018.
The New York Times reported that the deal, which was approved by the boards of Dell and VMware late Sunday, would simplify the stock structure of Dell and its publicly traded subsidiary.
Shares in DVMT, which last closed at US$84.58, rose nearly 12% to 94.33 in pre-market trade.
Once that deal is completed, the Dell Class C shares will be listed on the New York Stock Exchange.
Founder CEO Michael Dell and investment firm Silver Lake took Dell private in a leveraged buyout in 2013 for about US$25bn.
One-stop tech shop for business
Dell which is synonymous for personal computers, and has strong a lineup of servers, storage hardware and networking gear now has a growing suite of software tools in its arsenal through its EMC acquisition.
“The company has sought a symbiotic relationship with its hardware and software -- chasing closer integrations between the two and selling both to customers to extract higher profit margins,” noted Bloomberg.
Back in 2013, Dell and Silver Lake took a bold gamble in spending roughly US$25bn to take Dell private, and then splashing out US$67bn to buy EMC. Today, it has created a kind of one-stop powerhouse for hardware and software needed by companies to run their businesses.
“We’ve completely transformed our company and become a key leader in huge segments of the industry,” Dell said in a telephone interview to The New York Times.
“This has been the largest, most complex and successful integration in the history of the technology industry,” Egon Durban, the Silver Lake managing partner who has worked closely with Dell, told NYT.