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.

Exclusive: Dell, VMware Decide To Explore Options Including Merger - Sources

(Reuters) - US computer maker Dell Technologies Inc. and enterprise software provider VMware Inc. have decided to explore options that could include a possible merger of the two companies, said Thursday people close to the case.

The measure, which could not lead to any agreement is presented as Dell, the world's largest private technology company, seeking new avenues for growth after acquisition burdened with data storage provider EMC debt Corp. for $ 67 billion million in 2016.

Dell plans to announce Friday it will consider a potential reverse merger with VMware, as well as other alternatives, including an IPO or asset divestitures, the three sources.

VMware plans to announce the creation of a special committee of board members to consider a combination with Dell, sources said. VMware is 80 percent owned by Dell, so the special committee aims to make any combination subject to the approval of unintended directors to safeguard the interests of minority shareholders of VMware, according to the same sources.

The requested sources not to be identified because the case is confidential. Dell declined to comment, while VMWare did not immediately respond to a request for comment.

Dell is under pressure to increase profitability after the agreement EMC has not achieved the projected cost and performance savings, while higher component costs and the difficult data storage market have eroded margins.

The Round Rock, Texas-based company has struggled with fierce competition in the storage market, as cloud computing rivals such as Amazon.com Inc.'s AWS and Microsoft Corp's Azure put pressure on price The chief of the Dell's infrastructure, former EMC CEO David Goulden, left the company last fall and since then the company has been working on reorganizing its storage operations.

The PC market, Dell CEO Michael Dell, helped shape the Dell foundation in 1984 as a freshman year with savings of $ 1,000, it remained stagnant because of the popularity of smartphones and tablets, which is down 0.2% in 2017, according to International Data Corporation. .

A reverse merger would see VMware, which has a market capitalization of $ 51 billion, buy Dell, instead of Dell buying the minority stake in VMware that it does not have yet. A blocking clause prevents Dell from purchasing VMware before September.

"Whether VMware or Dell are the acquirers, we believe that the terms of the deal should involve a premium to minority shareholders of VMware," he wrote in a research note analyst at UBS Securities LLC, Evren Ergin.

Another consideration for Dell in its deliberations is possible to provide Silver Lake private equity firm to withdraw its investment in the way the company. Silver Lake helped finance the $ 24.9 billion Michael Dell transaction in 2013 to privatize the company and holds approximately 18 percent of the company.