Dell Technologies Inc.,
the world’s largest private technology company, announced plans to
trade publicly again, re-emerging five years after its leveraged buyout
as a financially stronger and more diverse leader in computer equipment
and software, though one burdened by debt.
The tech giant will return to public markets by buying out its tracking stock, DVMT, in a cash and share-swap deal valued at $21.7 billion, Dell said in a filing Monday. The shares, worth about $17 billion as of Friday, were created to mirror the value of software maker VMware Inc., in which Dell has a controlling stake. The move aims to simplify Dell’s tangled corporate structure without weighing on its balance sheet.
As part of the deal, VMware will pay DVMT shareholders an $11 billion special cash dividend and Dell will offer more shares -- or cash -- to make up the difference. Dell Technologies Class C common stock will become publicly listed on the New York Stock Exchange.
Founder Michael Dell
took the company he founded in his dorm room private in 2013 with
investment firm Silver Lake for about $25 billion, in part to shield the
company from public scrutiny as the PC business crumbled and it
expanded into software and services.
The tracking stock was created to help Dell finance its $67 billion
purchase of data storage company EMC Corp. in 2016, the largest
technology takeover ever at the time and one that nearly tripled the
company’s debt load. The deal for EMC was mostly cash, but the rest was
paid through the new security linked to part of EMC’s interest in
VMware. EMC owned a controlling stake in VMware and the rest of VMware
is publicly traded, as is the DVMT tracking stock.
DVMT has almost doubled since the stock was issued, closing at $84.58 on Friday, and they were up 8 percent at 9:38 a.m. in New York Monday. VMware, based in Palo Alto, California, makes makes virtualization software that helps maximize workloads on servers, as well as cloud and device management tools. DVMT shares rose 5.5 percent to $155.11.
As Chief Executive Officer, Dell has considered a variety of options to streamline his multicompany tech empire and help the business manage the debt, which stood at $52.7 billion in the latest fiscal first quarter, including its subsidiaries, even after paying down billions. Bloomberg first reported earlier this year that Dell was considering subsuming the tracking stock. Other options have included a Dell public offering or combination with VMware, Dell said in a January filing. Under closely held ownership, Dell has sought a new direction in a more challenging market for hardware makers, diversifying away from its namesake PCs and closer to software.
The transaction “has merit, after notable financial and operational performance gains since Dell went private," said Anand Srinivasan, technology analyst at Bloomberg Intelligence, adding that "Dell’s stock issue comes with high expectations, particularly versus Hewlett Packard Enterprise and NetApp."
Under terms of the agreement Monday, 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 $109
in cash per Class V share. The offer is a 29 percent premium to Class
V’s closing price Friday. The deal is expected to close in the fourth
quarter of 2018.
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The tech giant will return to public markets by buying out its tracking stock, DVMT, in a cash and share-swap deal valued at $21.7 billion, Dell said in a filing Monday. The shares, worth about $17 billion as of Friday, were created to mirror the value of software maker VMware Inc., in which Dell has a controlling stake. The move aims to simplify Dell’s tangled corporate structure without weighing on its balance sheet.
As part of the deal, VMware will pay DVMT shareholders an $11 billion special cash dividend and Dell will offer more shares -- or cash -- to make up the difference. Dell Technologies Class C common stock will become publicly listed on the New York Stock Exchange.
DVMT has almost doubled since the stock was issued, closing at $84.58 on Friday, and they were up 8 percent at 9:38 a.m. in New York Monday. VMware, based in Palo Alto, California, makes makes virtualization software that helps maximize workloads on servers, as well as cloud and device management tools. DVMT shares rose 5.5 percent to $155.11.
As Chief Executive Officer, Dell has considered a variety of options to streamline his multicompany tech empire and help the business manage the debt, which stood at $52.7 billion in the latest fiscal first quarter, including its subsidiaries, even after paying down billions. Bloomberg first reported earlier this year that Dell was considering subsuming the tracking stock. Other options have included a Dell public offering or combination with VMware, Dell said in a January filing. Under closely held ownership, Dell has sought a new direction in a more challenging market for hardware makers, diversifying away from its namesake PCs and closer to software.
The transaction “has merit, after notable financial and operational performance gains since Dell went private," said Anand Srinivasan, technology analyst at Bloomberg Intelligence, adding that "Dell’s stock issue comes with high expectations, particularly versus Hewlett Packard Enterprise and NetApp."
READ MORE!!!!
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