Dell Nears Deal That Would Make It a Public Company Again -- 3rd Update
July 01 2018 - 6:22PM
Dow Jones News
By Dana Cimilluca and Dana Mattioli
Dell Inc. is nearing a deal that would once again make the PC
and data-storage giant a public company, according to people
familiar with the matter.
Dell plans to announce as early as Monday that it intends to
acquire via a share swap the DVMT tracking stock, which tracks its
fast-growing VMware Inc. virtualization-software unit, the people
said.
Terms of the agreement, which could still fall through, couldn't
be learned, but Dell plans to acquire the DVMT shares at a premium
and DVMT shareholders are also expected to receive several billion
dollars in cash as part of the deal. Dell Technologies Inc., the
tracking stock's formal name, 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.
When Dell closed on its $67 billion deal for EMC, the largest
technology takeover ever, 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 18:07 ET (22:07 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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