Dell Technologies confirmed on Monday that it has reached a deal to reinlist the company on the New York Stock Exchange as part of a share swap with its stock activity tracking software DVMT VMware.
Dell said it plans to exchange each share of the DVMT trailing stock for 1.3665 common shares of Dell Technologies, or $ 109 per share.
CRN Exclusive: Michael Dell On Integrating ‘Extremely Closely’ With VMware And Public Cloud ‘Rationalization’]
Dell said the $ 109 per share represents a 29% premium over the closing DVMT share price and gives shareholders “the opportunity to participate in the future value creation of Dell Technologies.”
As part of the deal, VMware’s board of directors approved a one-time special dividend of $ 11 billion to all VMware shareholders.
Dell Technologies’ share of the dividend will be around $ 9 billion, which the company has said it intends to use to fund the cash payment to DVMT shareholders, with the remainder being used, if any, to repay. the debt.
VMware said it would remain an independent, publicly traded software company, with “better alignment between Dell’s economic and ownership interests” in VMware.
“I am proud to lead this great company to its next chapter as we continue to evolve and grow for the benefit of our customers, partners, investors and team members,” said Dell Founder and President Michael Dell, which owns 72% of Dell Technologies. ordinary actions. “Unprecedented growth in data is fueling the digital age of IT, security and our customers’ workforce transformations. Most importantly, I remain deeply committed to this company and work with our world-class team to create long-term value for Dell Technologies and its businesses. “
Private equity giant Silver Lake, which has partnered with Michael Dell to privatize Dell in the biggest private equity buyout in tech industry history, has said it will keep everything its 24% stake in Dell Technologies in connection with the transaction.
“We are grateful to Michael and his leadership team at Dell Technologies and VMware for their extraordinary performance leading up to this transaction, which will allow the company to continue on its trajectory of accelerated growth,” said Egon Durban, Managing Partner and Managing Director General de Silver. Lake. “We are delighted that public investors are sharing Dell Technologies’ dynamic value creation with Silver Lake, which has no intention of seeking cash and remains an enthusiastic long-term shareholder. “
Durban said Dell Technologies has “the most comprehensive and richest portfolio of technology assets spanning all aspects of digital and IT transformation and is strategically positioned to take full advantage of the new era of emerging technology trends, including ‘IoT, AI, machine learning, 5G, the cloud. IT and mobility. “
The transaction is expected to close in the fourth quarter.
Bob Venero, CEO of Holbrook, NY-based solutions provider Future Tech, partner of Dell EMC Titanium, said he expects the stock tracking transaction to make Dell EMC more competitive in a growing market. rapid evolution.
“There is obviously a reason why Michael [Dell] decided to acquire the follow-up stock, ”Venero said. “Things have changed from a tax law and write-off perspective. We must be able to evolve with the ebb and flow of the market. Michael has proven himself to be a financial wizard. This is just another example where Michael’s financial prowess will run the business in the most beneficial way for customers, partners, investors and shareholders. “
As for making Dell public again, Venero said it remains to be seen what kind of impact this will have on the business.
“No one has a crystal ball on the positive or negative impact of Dell’s reopening on the stock market,” he said. “It remains to be seen depending on how the company is going to operate and handle the more regulated reports and emotional feedback from shareholders.”
Venero said Future Tech has grown exponentially as a result of all of the moves Michael Dell has taken over the years, starting with an aggressive move in the channel to privatize the company and then acquire the market leader in EMC storage. and VMware.
In fact, Venero said its EMC and VMware business has grown significantly since Dell acquired EMC in 2016 for $ 67 billion, the largest technology acquisition in history.
Future Tech’s EMC storage business accounted for 1% of the company’s total sales when Dell acquired EMC two years ago and it now accounts for about 20% of annual sales, Venero said.
As for VMware, Future Tech struggled to partner with the software maker before the EMC deal and now sales of Future Tech’s VxRail and VxRack are growing at double-digit rates, Venero said. “The closer ties between VMware and Dell have benefited the partners,” he said.
Dell Technologies CEO Michael Dell told CRN in an interview last month that customers are demanding ever closer ties between Dell EMC and VMware infrastructure with “much, much more” integration coming to the fore. to come up.
“We have a long history of tighter technology integration here,” Dell said in an interview with CRN, just a week after Dell Technologies announced triple-digit growth for its VxRail and VxRack hyperconverged systems, which leverage the VMware software. “This is what customers have asked us to do. This is what we are doing. It is working extremely well. There is much, much more to come here.”
Venero, for his part, said he viewed the decision to acquire the DVMT follow-up stock and move closer to VMware as further testament to Michael Dell’s financial and technological savvy. “If history has taught us anything, it’s that Michael Dell is here to win it,” he said. “It’s one more move that makes Dell even more competitive.”