Dell Technologies Buying Out VMware Tracking Shares in Stock-or-Cash Deal

8:20 AM, Jul 2, 2018 — Dell Technologies (DVMT) said it will buy out the stock that tracks VMware (VMW) for a $109 a share value, with investors given the choice to opt for shares or cash of up to a total of $9 billion.

The class V stock will be swapped into class C shares at a ratio of 1.3665 shares for every one held, and the class C stock will be listed on the New York Stock Exchange after the deal closes, Dell said in a statement on Monday. The price gives a total consideration to class V holders of $21.7 billion.

Class V stockholders will own 20.8% of Dell if the cash consideration is used, or 31% of Dell in an all-stock deal, giving Dell a pro-forma equity value of $61.1 billion to $70.1 billion.

The class V shares were issued after Dell completed its merger with EMC, and have a correlation of about one-to-one with 61% of VMware common stock that Dell owns, it said. Dell holds a broader 81% economic stake in VMware, and nearly all of the voting interest in the software company.

“VMware has thrived as part of the Dell Technologies family,” Michael Dell, chairman of VMware and Dell, said in a statement. “After the transaction concludes, I am looking forward to VMware’s continued independent status, strategy and capital allocation policy for organic investment, M&A and shareholder returns.”

VMware said it will pay an $11 billion special dividend in connection with the deal, which wraps up Dell’s strategic review process announced earlier this year to figure out what to do with the class V tracking shares. A special committee was formed and examined four options before settling on the conversion, the company said.

“Following this one-time special dividend, we retain full financial flexibility to continue to pursue organic and inorganic investments, and to return capital to stockholders via share repurchases,” said VMware’s CFO, Zane Rowe.

Companies: Dell Technologies Inc.
Price: 96.14 Price Change: +11.56 Percent Change: +13.67

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