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Dell Goes Public Again, Raising VMware Questions

In what appears to be an innovative financial deal, Dell Technologies, five years after being taken private, will once again be traded on the NYSE.

After many months of speculation about how and when – not so much if – Michael Dell was going to take his company public, Dell Technologies on Monday announced that it has simplified its capital structure and will become a public company.

While the financial deal unveiled appears to be anything but simple, the end result is that Dell, the company that its founder and CEO so proudly took private in a $24 billion leveraged buyout in 2013, will again operate under the watchful eyes of Wall Street, while Michael Dell continues to serve as chairman and chief operating officer.

“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,” Dell, said. “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. 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.”

In a complicated financial move that involves what is called “tracking stock” – a common stock issued by a parent company that tracks the performance of a particular division without having claim on the assets of the division or the parent company – Dell Technologies is buying out shares of VMware tracking stock, aka DVMT.

The move came after the company reached an agreement with its special committee of independent directors. The committee has been working for the last five months, with the assistance of independent financial and legal advisers on a deal that would maximize stockholder value.

Michael Dell owns 72 percent of Dell Technologies shares and Silver Lake, a partner to the 2013 privatization deal, owns 24 percent. They will maintain their investment in the company.

In an interview on CNBC, Dell said that the company considered multiple options, including a reverse merger and a Dell Technologies IPO. He concluded that this was the best of all options because it will be less complicated in the long run.

Dell also talked about VMware and said he is committed to keeping the company public.

“I love VMware. It’s doing great. [CEO] Pat [Gelsinger] and the team have done a fabulous job in moving the business in this multicloud era, along with the turbo boost from Dell Technologies with 40,000 sales people,” he said. “VMware is very well positioned.”

Dell Technologies will continue to own 81 percent of VMware stock.

Brooke Sutherland, a Bloomberg columnist, says this leaves the door open for Dell and VMware to combine down the road, noting that while VMware will mostly operate independently, it doesn’t mean that there can’t be a future transaction.

“I see today’s announcement as an intermediate step that eventually gets us to a place where all of Dell Technologies interests are consolidated in one place," Sutherland said.

Going public, Dell Technologies plans to maintain the same strategic focus on long-term growth that it has achieved while being privately managed, the company said.

The transaction is expected to close in the fourth quarter, once closing conditions are met.

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