In a huge announcement, Dell unveiled that it has signed a definitive agreement that they will acquire EMC Corporation all the while maintaining VMware as a publicly-traded company. The terms of the agreement indicate that EMC shareholders will receive $24.05 per share in cash in as well as $9.10 of a tracking stock linked to a portion of EMC’s economic interest in VMware. In addition, EMC shareholders are presumed to collect approximately 0.111 shares of new tracking stock for each EMC share. Both companies have indicated that the value of the tracking stock can potentially vary from the market price of VMware due to the different characteristics and rights of the two stocks. EMC’s Board of Directors has already approved of the merger agreement and anticipates that stockholders will do the same.
In a huge announcement, Dell unveiled that it has signed a definitive agreement that they will acquire EMC Corporation all the while maintaining VMware as a publicly-traded company. The terms of the agreement indicate that EMC shareholders will receive $24.05 per share in cash in as well as $9.10 of a tracking stock linked to a portion of EMC’s economic interest in VMware. In addition, EMC shareholders are presumed to collect approximately 0.111 shares of new tracking stock for each EMC share. Both companies have indicated that the value of the tracking stock can potentially vary from the market price of VMware due to the different characteristics and rights of the two stocks. EMC’s Board of Directors has already approved of the merger agreement and anticipates that stockholders will do the same.
The landmark deal is huge for Michael Dell, as the acquisition allows Dell to further reinvent itself as an enterprise company with a new focus on large-enterprise storage, as well as security technology, a sector in which Dell has been lacking. That being said, the company’s performance as a business appears to be still going strong, as its share of the global PC market has been a steady 14 percent. EMC, on the other hand, had fallen more than 12 percent before the story broke about the talks.
Dell’s acquisition of EMC makes them the world’s largest privately-controlled, integrated technology company. Previously, EMC was in talks with Hewlett-Packard for a deal; however, discussions fell through, which lead to entering talks with Dell and ultimately to this story today.
In order to seek aid in the finances of this monumental transaction, Dell and Silver Lake gathered a group of banks to assemble the bank loan package; a move that would occur before Federal Reserve’s long-awaited plans to raise interest rates. As a result, this could potentially add tens of millions of dollars in higher debt payments. However, those involved with the finances of the deal indicated that a substantial share of the debt will be rated near investment grade, which will make the interest payments lower.
It should be noted that VMware will remain publicly held for an extended period of time.
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