PC maker Dell Technologies said Monday that it plans to buy the publicly traded DVMT, which tracks VMware. The company is offering them $109 in cash for each share they hold, or 1.3665 shares of the new Dell stock, which will list on the NYSE.
Dell bought EMC in 2016 for $67bn, gaining a dominant position in enterprise storage and hyper-converged infrastructure systems.
The move will mark the culmination of a strategic review that Dell has been conducting for several months as it has sought to consolidate its complicated ownership structure without overburdening its balance sheet, which bears around $50 billion (£37.97 billion) in debt.
Dell founder Michael Dell and investment firm Silver Lake had taken Dell Technologies private in 2013, seeking a freer range of movement that comes with more distance from Wall Street and investors.
Earlier this year, Dell disclosed that it was considering a reverse merger with VMware as part of its public market return. And for DVMT shareholders who opt for Dell Technologies Class C common stock rather than cash, "there should be a significant amount of upside" given its current low valuation, she said. The stock was up 10 percent at $93 in afternoon trading.
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The tracking stock has almost doubled in value since it was issued, closing Friday at $84.58. VMware shares also rose 10 percent to $161.75.
The transaction is expected to close in the fourth quarter following approval by a majority of unaffiliated Class V shareholders.
"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". Bloomberg first reported earlier this year that Dell was considering subsuming the tracking stock. "The company paid down 25 percent of its $42 billion debt in two years and cash flow is strong".
"We don't anticipate any changes", Dell said during a conference call with investors. VMware also said it would remain an independent public company. However, a special committee of VMware's board of directors formed to safeguard the interest of VMware minority shareholders pushed back against the terms that Dell was proposing, according to sources familiar with the matter.