Dell is going public again with tracking stock buyout

Eileen GuzmanJul 03, 2018

Michael Dell, who now owns 72 per cent of Dell Technologies common shares, struck a deal with the private equity firm Silver Lake to take the company private in 2013 in an effort to reorganize without pressure from public shareholders. Dell founder Michael Dell and investment firm Silver Lake took Dell private in a leveraged buyout in 2013 for about $25 billion.

Dell is offering VMware shareholders 1.3665 class C common Dell shares in exchange for each VMware share. This will bring common stock of Dell Technologies to be listed on the New York Stock Exchange (NYSE).

The cash component of the offer will be financed by a one-time $11 billion special dividend that VMware will pay out pro-rata to its shareholders.

The transaction was likely "initially driven by a desire to find some liquidity for the major shareholders" by unlocking some of the cash VMware had been sitting on, said Shannon Cross, analyst at Cross Research.

Michael Dell, which owns 72% of the company's common shares, will remain as chairman and CEO.

Dell Technologies Inc is proposing to become a publicly traded corporation again, according to a * a target="_blank" href="*&sort=Date&formType=1&isAdv=true&stemming=true&numResults=10&queryCo=Dell%20Technologies&numResults=10" *filing lodged with the SEC this morning.

When Dell Inc. closed the biggest technology merger in history almost two years ago, the company's namesake founder said the new entity would enjoy its freedom away from the glare of Wall Street and its obsession with quarterly earnings. The agreement also included EMC's majority stake in VMWare, which now has a market cap of around $50 billion, as well as ownership of Pivotal, SecureWorks, RSA and VirtuStream.

"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".

Dell Technologies had been paying roughly $2 billion a year in interest on that debt when Congress passed legislation at the end of 2017 that eliminated a big chunk of the deductions companies can make on such payments. That meant Dell would be beholden to the whims of public markets, perhaps laden with short-term pessimism over the company's urgent need to find a transition.

"Dell is a very different company than it was five years or so years ago".

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