Dell and EMC announced they have signed a definitive agreement under which Dell, together with its owners, Michael S. Dell, Founder, Chairman, and CEO of Dell, MSD Partners, and Silver Lake, the global leader in technology investing, will acquire EMC Corporation, while maintaining VMware as a publicly-traded company.
Dell and EMC announced they have signed a definitive agreement under which Dell, together with its owners, Michael S. Dell, Founder, Chairman, and CEO of Dell, MSD Partners, and Silver Lake, the global leader in technology investing, will acquire EMC Corporation, while maintaining VMware as a publicly-traded company.
"The combination of Dell and EMC creates an enterprise solutions powerhouse bringing our customers industry-leading innovation across their entire technology environment. Our new company will be exceptionally well-positioned for growth in the most strategic areas of next generation IT including digital transformation, software-defined data center, converged infrastructure, hybrid cloud, mobile and security," said Dell.
Under the terms of the agreement, EMC shareholders will receive US$24.05 per share in cash in addition to tracking stock linked to a portion of EMC's economic interest in the VMware business. Based on the estimated number of EMC shares outstanding at the close of the transaction, EMC shareholders are expected to receive approximately 0.111 shares of new tracking stock for each EMC share. Assuming, for illustrative purposes, a valuation for each share of tracking stock of $81.78, the intraday volume-weighted average price for VMware on Wednesday, October 7, 2015, EMC shareholders would receive a total combined consideration of $33.15 per EMC share and the total transaction would be valued at approximately $67 billion. The value of the tracking stock may vary from the market price of VMware given the different characteristics and rights of the two stocks.
The EMC Board of Directors approved the merger agreement and intends to recommend that stockholders of EMC approve the agreement.
"The combination of Dell and EMC creates an enterprise solutions powerhouse bringing our customers industry-leading innovation across their entire technology environment. Our new company will be exceptionally well-positioned for growth in the most strategic areas of next generation IT including digital transformation, software-defined data center, converged infrastructure, hybrid cloud, mobile and security," said Dell. "Our investments in R&D and innovation along with our privately-controlled structure will give us unmatched scale, strength and flexibility, deepening our relationships with customers of all sizes. I am incredibly excited to partner with the EMC, VMware, Pivotal, VCE, RSA, and Virtustream teams and am personally committed to the success of our new company, our customers and partners."
"I'm tremendously proud of everything we've built at EMC – from humble beginnings as a Boston-based startup to a global, world-class technology company with an unyielding dedication to our customers," said Joe Tucci, Chairman and CEO of EMC. "But the waves of change we now see in our industry are unprecedented and, to navigate this change, we must create a new company for a new era. I truly believe that the combination of EMC and Dell will prove to be a winning combination for our customers, employees, partners, and shareholders."
VMware will remain a publicly-traded company and continue to provide customers value through leading software-defined data center technology, together with its cloud, mobile and desktop offerings. This transaction is expected to accelerate VMware’s growth across all of its businesses through significant synergies with Dell's solutions and go-to-market channels. VMware remains committed to investing in and partnering with its strong, industry ecosystem.
TRANSACTION TERMS
The transaction will be financed through a combination of new common equity from Dell, MSD Partners, Silver Lake, and Temasek, the issuance of tracking stock, as well as new debt financing and cash on hand. There are no financing conditions to the closing of the transaction.
Dell and related stockholders will own approximately 70 percent of the company’s common equity, excluding the tracking stock, similar to their pre-transaction ownership.
The transaction is subject to customary conditions, including receipt of required regulatory and EMC stockholder approvals. The transaction is expected to close in the second or third quarter of Dell’s fiscal year ending February 3, 2017 (within the months of May to October 2016).