ROUND ROCK, Texas, April 14, 2021 /PRNewswire/ --
- Dell Technologies to spin-off its 81% equity ownership of
VMware, forming two standalone public companies
- Under terms of the planned spin-off, VMware will distribute a
special cash dividend of $11.5 -
$12 billion to all VMware
shareholders, including Dell Technologies
- The companies will strengthen their mutually beneficial
strategic relationship and continue to co-engineer solutions for
customers through a commercial agreement
- Transaction drives additional growth opportunities for Dell
Technologies and unlocks significant value for stakeholders
Dell Technologies (NYSE:DELL) announces the planned spin-off of
its 81% equity ownership interest in VMware
(NYSE:VMW). The transaction will result in two standalone
companies positioned for growth in the data era. The transaction is
expected to close during the fourth quarter of calendar 2021,
subject to certain conditions, including receipt of a favorable IRS
private letter ruling and an opinion that the transaction will
qualify as generally tax-free for Dell Technologies shareholders
for U.S. federal income tax purposes.
Dell Technologies and VMware will enter into a commercial
agreement that will preserve the companies' unique and
differentiated approaches to the co-development of critical
solutions and alignment on sales and marketing activities. VMware
will continue to use Dell Financial Services to help its customers
finance their digital transformations.
"By spinning off VMware, we expect to drive additional growth
opportunities for Dell Technologies as well as VMware, and unlock
significant value for stakeholders," said Michael Dell,
chairman and chief executive officer, Dell Technologies. "Both
companies will remain important partners, providing Dell
Technologies with a differentiated advantage in how we bring
solutions to customers. At the same time, Dell Technologies will
continue to modernize its core infrastructure and PC businesses and
embrace new opportunities through an open ecosystem to grow in
hybrid and private cloud, edge and telecom."
Upon completion of the spin-off, Michael
Dell will remain chairman and chief executive officer of
Dell Technologies, as well as chairman of the VMware board.
Zane Rowe will remain interim CEO of
VMware, and the VMware board of directors will remain
unchanged.
Creating Substantial Value
After a comprehensive review of potential strategic options,
both parties determined that this transaction will simplify capital
structures and create additional long-term enterprise value. At the
transaction closing, VMware will distribute a special cash dividend
of $11.5 - $12
billion to all VMware shareholders, including Dell
Technologies. Based on Dell Technologies' current 80.6%
ownership in VMware, Dell Technologies would receive approximately
$9.3 - $9.7
billion and intends to use the net proceeds to pay down
debt, positioning the company well for Investment Grade
ratings.
At the transaction closing, Dell Technologies shareholders would
receive approximately 0.44 shares of VMware for each share of Dell
Technologies that they hold, based on shares outstanding today. The
final ratio is subject to incremental dilution prior to the
transaction close. VMware will shift from a multiclass to a single
class share structure while Dell Technologies' share structure
remains the same.
Benefits to Dell Technologies
With an even stronger capital structure, Dell Technologies is
poised to further capitalize on the rebound in infrastructure and
PC spend, new cloud operating models driving as-a-Service growth,
compute moving to the edge, and customers' longer-term digital
transformation initiatives. With a strong commercial agreement in
place, Dell Technologies will have the ability to continue to work
closely with VMware to drive innovation and preserve go-to-market
synergies while generating new growth opportunities through an open
ecosystem. With technology at the center of the world's recovery,
Dell Technologies is focused on:
- Further strengthening the company's leadership position in
growing technology infrastructure and client markets
- Expanding into new growth areas of hybrid cloud, edge, 5G,
telecom and data management
- Delivering a modern customer experience in the do-from-anywhere
economy, including moving quickly toward cloud operating and
consumption models under the APEX initiative
Transaction Details
The transaction is expected to close during the fourth quarter
of calendar 2021, subject to certain conditions, including receipt
of a favorable IRS private letter ruling and an opinion that the
transaction will generally qualify as a tax-free spin-off to Dell
Technologies shareholders for U.S. federal tax purposes.
Immediately following, and automatically as a result of, the
spin-off, each share of VMware class B common stock will
automatically convert into one fully paid and non-assessable share
of VMware class A common stock. All of the outstanding VMware class
B common stock is held by Dell Technologies.
Additional information regarding this announcement can be found
in the Form 8-K and Schedule 13D amendment filed
by Dell Technologies with the United States
Securities and Exchange Commission (SEC) on April 14,
2021.
Investor Call
Dell Technologies today also announced an investor call to
discuss details of the transaction on April
14, 2021 at 5:00 pm Eastern
Time. The call can be accessed at
https://investors.delltechnologies.com/events-and-presentations/upcoming-events
About Dell Technologies
Dell Technologies (NYSE:DELL) helps organizations and
individuals build their digital future and transform how they work,
live and play. The company provides customers with the industry's
broadest and most innovative technology and services portfolio for
the data era.
Dell Technologies Forward-Looking Statements
This communication contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. The words
"may," "will," "anticipate," "estimate," "expect," "intend,"
"plan," "aim," "seek," and similar expressions as they relate to
Dell Technologies or its management are intended to identify these
forward-looking statements. All statements by Dell Technologies
regarding the expected timing, completion and effects of the
proposed transaction and similar matters are forward-looking
statements. The expectations expressed or implied in these
forward-looking statements may not turn out to be correct. All
forward-looking statements speak only as of the date hereof and are
based on current expectations and involve a number of assumptions,
risks and uncertainties that could cause the actual results to
differ materially from such forward-looking statements. Dell
Technologies may not be able to complete the proposed transaction
on the contemplated terms or other acceptable terms or at all
because of a number of factors, including the occurrence of any
event, change or other circumstances that could give rise to the
termination of the definitive agreement governing the proposed
transaction, the failure to obtain adequate financing sources for
the VMware special dividend, the failure of VMware to satisfy
certain rating agency criteria, the effect of the announcement of
the transaction on Dell Technologies' ability to retain and hire
key personnel and maintain relationships with its customers,
suppliers, operating results and business generally, and other
risks, uncertainties, and other factors that could affect Dell
Technologies' results in future periods, including, but not limited
to, the following: the effects of the COVID-19 pandemic;
competitive pressures; Dell Technologies' reliance on
third-party suppliers for products and components, including
reliance on single-source or limited-source suppliers; Dell
Technologies' ability to achieve favorable pricing from its
vendors; adverse global economic conditions and instability in
financial markets; Dell Technologies' execution of its growth,
business, and acquisition strategies; the success of Dell
Technologies' cost efficiency measures; Dell Technologies' ability
to manage solutions and products and services transitions in an
effective manner; Dell Technologies' ability to deliver
high-quality products, software, and services; cyber-attacks or
other data security incidents; Dell Technologies' foreign
operations and ability to generate substantial non-U.S. net
revenue; Dell Technologies' product, services, customer, and
geographic sales mix, and seasonal sales trends; the performance of
Dell Technologies' sales channel partners; access to the capital
markets by Dell Technologies or its customers; material impairment
of the value of goodwill or intangible assets; weak economic
conditions and the effect of additional regulation on Dell
Technologies' financial services activities; counterparty default
risks; the loss by Dell Technologies of any contracts for ISG
services and solutions and its ability to perform such contracts at
their estimated costs; loss by Dell Technologies of government
contracts; Dell Technologies' ability to develop and protect its
proprietary intellectual property or obtain licenses to
intellectual property developed by others on commercially
reasonable and competitive terms; disruptions in Dell Technologies'
infrastructure; Dell Technologies' ability to hedge effectively its
exposure to fluctuations in foreign currency exchange rates and
interest rates; expiration of tax holidays or favorable tax rate
structures, or unfavorable outcomes in tax audits and other tax
compliance matters; impairment of portfolio investments;
unfavorable results of legal proceedings; compliance requirements
of changing environmental and safety laws or other laws; the effect
of armed hostilities, terrorism, natural disasters, and public
health issues; Dell Technologies' dependence on the services of
Michael Dell and key employees; Dell
Technologies' level of indebtedness; and the impact of the
financial performance of VMware.
This list of risks, uncertainties, and other factors is not
complete. Dell Technologies discusses some of these matters more
fully, as well as certain risk factors that could affect Dell
Technologies' business, financial condition, results of operations,
and prospects, in its reports filed with the SEC, including Dell
Technologies' annual report on Form 10-K for the fiscal year ended
January 29, 2021, quarterly reports
on Form 10-Q, and current reports on Form 8-K. These filings are
available for review through the SEC's website at www.sec.gov. Any
or all forward-looking statements Dell Technologies makes may turn
out to be wrong and can be affected by inaccurate assumptions Dell
Technologies might make or by known or unknown risks,
uncertainties, and other factors, including those identified in
this press release. Accordingly, you should not place undue
reliance on the forward-looking statements made in this press
release, which speak only as of its date. Dell Technologies does
not undertake to update, and expressly disclaims any duty to
update, its forward-looking statements, whether as a result of
circumstances or events that arise after the date they are made,
new information, or otherwise.
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SOURCE Dell Technologies