As part of a $21.7 billion agreementannounced Monday, the PC and data storage company is offering to exchange tracking stock for a new class of common shares. Each share of Dell Technologies Class V stock will be converted into about 1.37 shares of Class C common stock, Dell Technologiessaid. VMware will remain a stand-alone company, and Dell will continue to own 81 percent of VMware's common stock. VMware is financing the cash component of the deal with a one-time, $11 billion special dividend paid pro-rata to its shareholders. The shares, worth about $17 billion as of Friday, were created to mirror the value of software maker VMware Inc., in which Dell has a controlling stake.
Private equity firm Silver Lake helped bankroll Dell CEO Michael Dell in taking the company private in 2013 in a $24.9 billion leveraged buyout.
DVMT has nearly doubled since the stock was issued, closing at $84.58 on Friday, and they were up 8 percent at 9:38 a.m.in New York Monday. The stock was up 10 percent at $93 in morning trading, while VMware shares rose 7.2 percent to $157.56.
The transaction is expected to close in the fourth quarter following approval by a majority of unaffiliated Class V shareholders. Following the deal, investors who owned the tracking stock will in aggregate account for between 20.8 percent and 31 percent of Dell's ownership.
"Unprecedented data growth is fueling the digital era of IT, and we are uniquely positioned with our portfolio of technologies and services to enable the digital, IT, security and workforce transformations of our customers", he said.
His strategy is in sharp contrast to that of rival HP Inc, which separated in 2016 from Hewlett Packard Enterprise Co, based on the reasoning that having two technology companies focusing separately on hardware and services would make them more nimble. Dell had been exploring a reverse merger earlier this year. Its total debt has also gone down by $4.6 billion since the EMC deal. "And we're seeing tremendous momentum inside the business", Michael Dell told analysts on a conference call. The company went private in order to undertake a massive turnaround plan amid a wildly changing computing market, but now is ready to return as a public entity and as an even stronger force in the Tech sector.