Dell set to go public again with VMware tracking stock buyout

Bloomberg

Dell Technologies Inc, the world’s largest private technology company, announced plans to trade publicly again, entering a new stage of a multi-year turnaround plan.
The tech giant will return to public markets by subsuming its tracking stock, DVMT, in a cash and share-swap deal, Round Rock, Texas-based Dell said in a filing on Monday. The shares, currently worth about $17 billion, are meant to mirror the value of software maker VMware Inc, in which Dell has a controlling stake.
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, giving a total deal size of $21.7 billion. Dell Technologies Class C common stock will become publicly listed on the New York Stock Exchange.
CEO Michael Dell has considered a variety of options to streamline his multicompany tech empire and help the business manage a massive debt load. 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.
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. The deal is expected to close in the fourth quarter of 2018.
The transaction “has merit merit, after notable financial and operational performance gains since Dell went private,” said Anand Srinivasan, technology analyst at Bloomgerg Intelligence, adding that “Dell’s stock issue comes with high expectations, particularly versus Hewlett Packard Enterprise and NetApp.”
DVMT shares are up 13.7 percent in pre-market trading in New York. VMware share are up 12.3 percent.
Dell has undergone five years of corporate machinations, resulting in a tangled corporate structure. Founder Dell took the company private for about $25 billion in 2013 with investment firm Silver Lake. 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. The deal 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. VMware, based in Palo Alto, California, makes makes virtualisation software that helps maxi-
mise workloads on servers, as well as cloud and device
management tools.
Once a household name for its line of personal computers, Dell has expanded to compete in a broader swath of the IT market. It’s now known for its lineup of servers, storage hardware and networking gear. Through its EMC acquisition, it also now has a growing suite of software tools in its arsenal. 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.