Michael Dell Is Working On The Details of A Reverse-merger With VMware, And Here's What It Will Probably Look Like

Michael Dell and his advisors are starting to focus on the details of a reverse merger with VMware to reintegrate Dell technologies into the public market, although any final decision or agreement is more than a month away, say people close to Dell. the subject.

Dell and VMware are considering a stock exchange, which may or may not include money, that would allow Dell to access all of VMware's cash flow by merging the companies into a new publicly traded entity.

A Dell-VMware combination would also allow acquiring Dell tracking stock (ticker: DVMT) with a premium, people said, who asked not to be identified because the conversations are private. This transaction will probably also be complemented by an exchange of shares, trading the new company's shares against the tracker, people said.

Michael Dell is considering an agreement now in part because his server business is growing and the PC business is stable, said one of the people. Dell acquired EMC for $ 67 billion in the largest pure technology agreement that existed in 2015 and subsequently reduced the total consolidated debt by approximately $ 10 billion.

As a result, Michael Dell can get a fair valuation of the closed business at a particularly high price now, allowing it to retain more control over a Dell-VMware handset.

Dell and VMware both made public statements last month, highlighting Dell's assessment of possible "business opportunities," which include an initial public offering and a merger. Dell may also decide to maintain the status quo.

An initial public offering from Dell is not considered as strong as the reverse merger because it does not simplify Dell's capital structure, two people said.

Dell already has about 80% of VMware. While VMware, which manufactures virtualization software, should not allow public shareholders to vote on the deal, the board will consider adding a so-called "majority majority" vote to determine fairness, said one of the participants.

CNBC reported in January that Dell was considering a reverse merger with VMware, which would also allow Silver Lake private equity fund, co-investor with Michael Dell, to monetize its investment by selling shares in the public market.

The new tax laws of EE. UU They will also force Dell to deduct only 30% of the interest it pays on its $ 52.5 billion debt. Dell paid $ 2 billion last year in interest payments, which he was able to deduct from his taxes.