In its latest turn of corporate machination, Dell Technologies has chose to return to the public market via a cash and share-swap deal that's meant to help the company boost revenue and raise funds.
"We believe that this development is positive for VMW's shares not only because it avoids the reverse merger scenario, but also because there is the possibility of VMW being taken out by Dell in the future as a "second step" following this transaction", FBN Securities analyst Shebly Seyrafi wrote in a note.
Michael Dell, who owns 72 percent of the company's common shares, will remain as chairman and CEO. Silver Lake will keep its 24% minority stake.
VMware is surging Monday morning, trading up 9.56%, after its parent company, Dell Technologies, said it will buy out the shares that track its performance as part of a broader effort to simplify its ownership structure. Dell Technologies will return to the public markets later this year with the sale of a tracking stock issued to its private shareholders that values the company at a 29 percent premium over the last closing price of those private shares.
Dell Technologiesannounced Monday that it has decided after a months-long deliberation to again offer its shares to public market investors.
The tracking stock was created to help Dell finance its $67 billion purchase of data storage company EMC Corp.in 2016, the largest technology takeover ever at the time and one that almost tripled the company's debt load.
Dell said early this year that it has about 8,700 employees in MA. EMC owned the majority stake in VMware, which Dell inherited. The company is offering them $109 in cash for each share they hold, or 1.3665 shares of the new Dell stock, which will list on the NYSE.
In a separate announcement Monday, VMware said it was giving an $11 billion special dividend to shareholders tied to the completion of the Dell Technologies deal.
After the deal, expected to close in the fourth quarter, holders of Dell's tracking stock will own between 20.8 percent and 31 percent of Dell depending on how many investors opt for cash, Dell said. "The company paid down 25 percent of its $42 billion debt in two years and cash flow is strong".
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