Dell Confirms Deal To Go Public In VMware Tracking Stock Share Swap

Dell Technologies Monday confirmed that it has reached an agreement to take the company public again on the New York Stock Exchange as part of a share swap with its DVMT VMware software business tracking stock.

Dell said it is planning on exchanging each share of the DVMT tracking stock for 1.3665 shares of Dell Technologies common stock, or $109 per share.

[Related: CRN Exclusive: Michael Dell On Integrating 'Extremely Closely' With VMware And Public Cloud 'Rationalization']

Dell said the $109 per share represents a 29 percent premium to the DVMT share closing price and gives the shareholders the "opportunity to participate in Dell Technologies'" future value creation.

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As part of the deal, VMware'sboard of directors has approved an $11 billion one-time special dividend to all VMware shareholders.

Dell Technologies' share of the dividend will be approximately $9 billion, which the company said it intends to use to finance the cash payment to DVMT shareholders with the remainder if any being used to pay down debt.

VMware said it will remain an independent publicly listed software company, with "improved alignment between Dell’s economic and ownership interests" in VMware.

"I am proud to lead this great company into its next chapter as we continue to evolve and grow to the benefit of our customers, partners, investors and team members," said Dell founder and Chairman Michael Dell, who owns 72 percent of Dell Technologies common stock. "Unprecedented data growth is fueling the digital era of IT, security and workforce transformations of our customers. Most importantly, I remain deeply committed to this company and working with our world-class team to build the long-term value of Dell Technologies and its businesses."

Private equity behemoth Silver Lake, which partnered with Michael Dell to take Dell private in the largest private equity buyout in the history of the technology industry, said it will maintain its entire 24 percent stake in Dell Technologies as part of the transaction.

"We are grateful to Michael and his management team at Dell Technologies and VMware for their extraordinary performance that has preceded this transaction, which will enable the company to continue on its accelerating growth trajectory," said Egon Durban, managing partner and managing director of Silver Lake. "We are excited that public investors will share in Dell Technologies' dynamic value creation with Silver Lake, which has no plans to seek liquidity and remains an enthusiastic long-term shareholder."

Durban said Dell Technologies has the "most complete and richest portfolio of technology assets spanning all aspects of digital and IT transformation and is strategically postioned to take full advantage of the new era of emerging technology trends including IoT, AI, Machine Learning, 5G, cloud computing and mobility."

The transaction is expected to close in the fourth quarter.

Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech, a Dell EMC Titanium partner, said he expects the tracking stock deal to make Dell EMC more competitive in a fast-changing market.

"There is obviously a reason Michael [Dell] has decided to acquire the tracking stock," said Venero. "Things have changed from a tax law and write-off perspective. You have to be able to change with the ebbs and flows of the market. Michael has proven himself to be a financial wizard. This is just another example where Michael's financial prowess is going to lead the company in a way that is most advantageous for customers, partners, investors and stockholders."

As for making Dell a publicly held company once again, Venero said it remains to be seen just what kind of impact that will have on the company.

"Nobody has a crystal ball on what the impact positive or negative will be with Dell going public again," he said. "That is yet to be seen based on how the company is going to function and deal with the more regimented reporting and emotional feedback of shareholders."

Venero said Future Tech has grown exponentially as a result of all the moves Michael Dell has made over the years, starting with an aggressive move into the channel to taking the company private and then acquiring storage market leader EMC and VMware.

In fact, Venero said both his EMC and VMware business is up significantly since Dell acquired EMC in 2016 for $67 billion in the largest technology acquisition in history.

Future Tech's EMC storage business was 1 percent of the company's total sales when Dell acquired EMC two years ago and now it is about 20 percent of annual sales, said Venero.

As for VMware, Future Tech struggled with partnering with the software maker before the EMC deal and now Future Tech's VxRail and VxRack sales are growing at a double-digit clip, said Venero. "The tighter ties between VMware and Dell have benefited partners," he said.

Dell Technologies CEO Michael Dell told CRN in an interview last month that customers are demanding ever-tighter ties between Dell EMC infrastructure and VMware with "much, much more" integration to come in the future.

"We have a long history here of integrating the technologies closer together," said Dell in the interview with CRN, just one week after Dell Technologies reported triple-digit growth for its VxRail and VxRack hyper-converged systems, which leverage VMware software. "This is what customers have been asking us to do. It is what we are doing. It is working extremely well. There is much, much more to come here."

Venero, for his part, said he sees the decision to acquire the DVMT tracking stock and get closer to VMware as one more testatment to the financial and technology acumen of Michael Dell. "If history has taught us anything, it is that Michael Dell is in it to win it," he said. "This is one more move that makes Dell yet again more competitive."