Dell, 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, Texas-based Dell said in a filing Monday.
The shares, currently worth about $17 billion (€14.6 billion), are meant to mirror the value of software maker VMware, in which Dell has a controlling stake.
As part of the deal, VMware will pay DVMT shareholders an $11 billion special dividend and Dell will offer more shares 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.
Chief executive 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.
The DVMT shareholders - 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 per cent premium to Class V’s closing price on Friday.
Dell has undergone five years of corporate machinations, resulting in a tangled corporate structure. Founder Michael 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 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 on Friday. VMware, based in Palo Alto, California, makes makes virtualization software that helps maximize 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.
The company, which missed out on the cloud-computing wave, has tried to develop next-generation solutions to enable the internet of things, in which everyday devices will be digitally connected and businesses will need more computing power away from centralized data centres. It has tried to revamp itself as a cloud player by offering customers software from a suite of smaller companies in which it's invested, in a bid to take back sales from Amazon and Microsoft.
Dell has fostered tighter product integrations with VMware that help manage customer workloads with Dell hardware and VMware software. The companies also each sell each other’s products to existing and new customers.
Dell’s debt almost tripled with its purchase of EMC. Even after paying down billions, Dell still has $52.7 billion in debt, including its subsidiaries. – Bloomberg
