DVMT Dell Technologies Inc. Class V (delisted)

By Dana Cimilluca and Dana Mattioli 

Dell Inc. is nearing a deal to combine with shares that track its fast-growing VMware Inc. virtualization-software unit, a move that would give the PC and data-storage giant a public listing once again, according to people familiar with the matter.

Dell plans to announce as early as Monday that it is acquiring DVMT tracking stock via a share swap, according to people familiar with the matter.

Terms of the agreement, which could still fall through, couldn't be learned, but DVMT shareholders are expected to receive several billion dollars in cash as part of the deal. Dell Technologies Inc. has a market capitalization of nearly $17 billion, while VMware's is nearly $60 billion, after the shares rose this year on the possibility of a deal.

The move would culminate a strategic review Dell has been conducting for months. Other options it considered include a combination with VMware itself or a straight initial public offering, the company has said.

The tracking stock was created as a way to help finance Dell's purchase of storage pioneer EMC in 2016. The deal was largely in cash, but the remainder was paid via the new security that was linked to a portion of EMC's interest in the VMware business, which provides cloud-infrastructure services.

Issuing the tracking stock meant Dell didn't have to raise quite as much money to finance the deal.

The tracking stock has nearly doubled in value since it was issued, closing Friday at $84.58.

The transaction would be the latest in a series of big deals that have transformed Dell in the last five years -- and loaded it with debt.

The company went private in a roughly $25 billion leveraged buyout in 2013 by its founder, Michael Dell, and investment firm Silver Lake. In 2016, Dell bought EMC for $67 billion in the largest technology takeover ever.

When the deal closed in late 2016, Dell employed about 140,000 people globally and had $74 billion in revenue. It is now one of the world's largest privately controlled tech companies.

Once the largest personal-computer maker, Dell is now known as much for its corporate products such as storage, servers and security software following the EMC deal. It also is joining the crowded field of companies wagering big money on the so-called Internet of Things, as the computing giant looks for new avenues of growth amid a shift in corporate spending to the cloud.

The Round Rock, Texas, company has said it would commit $1 billion to research and development to create hardware and software that would help manage billions of everyday devices connected to the web.

Silver Lake, which maintains a big stake in Dell, has a history of backing the deal-making of its portfolio companies. In addition to Dell, it has done so at Broadcom Ltd., which attempted a $105 billion hostile takeover of Qualcomm Inc. -- it was forced to abandon the pursuit, and Symantec Corp., which has bought a string of cybersecurity companies.

VMware, based in Palo Alto, Calif., produces software related to databases, storage and the Internet of Things. Dell owns about 80% of VMware.

Write to Dana Cimilluca at dana.cimilluca@wsj.com and Dana Mattioli at dana.mattioli@wsj.com

(END) Dow Jones Newswires

July 01, 2018 17:06 ET (21:06 GMT)

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