Exploring the best possibilities of Dell, VMware Spin Off
By MYBRANDBOOK
Dell Technologies Inc. is exploring options on the possible spinoff for its roughly about $50 billion stake in VMware Inc. as the PC maker seeks to boost the value of its shares. VMware is well recognised as the Dell’s crown jewel due to its massive power of virtualization market share, large presence in the corporate world .
As on date, Dell owns an 81 percent stake in VMware, which it acquired through its blockbuster acquisition of EMC in 2016. Roughly $47 billion stake in VMware who has a market cap of nearly $58 billion. The deal that could yield billions, but would separate the tech giant from its fastest-growing business unit.
Under a Dell Technologies proposal to spin off its stake in VMware, Dell Technologies CEO and VMware Chairman Michael Dell and Silver Lake, private equity partner will retain approximately 65 percent majority stake in VMware.
Dell Technologies Chairman and CEO Michael Dell said in a statement. "Regardless of the options we are exploring to create additional value, we are accelerating our strategy - which remains unchanged. We are focused on winning in the consolidating markets where we operate and innovating across the Dell Technologies portfolio to create integrated solutions that turn data into insights and action.
If the spin-off is completed, Michael Dell will own approximately 42 percent of VMware, while Silver Lake will hold about 23 percent, Dell says that a potential spin-off wouldn’t happen before September 2021.
The reason of selling its majority stake in the virtualization leader, Dell hopes to improve its own credit rating and achieve an investment grade rating quicker and second most important part of the negotiations will center on a commercial agreement between Dell and VMware that would formalize aspects of its current working relationship.
In that statement, as well as a 13D filing with the SEC, Dell said a spin-off wouldn’t happen before September 2021. Dell’s stock was up 6.78 percent to $56.25 in after-hours trading on Wednesday as VMware’s stock rose 2.65 percent to $143.40. However, there are some chances are also there, Dell said it’s also still evaluating “a range of strategic options concerning its ownership of VMware.” Those include maintaining its ownership stake as it now stands.
Last but not the least, the great spinoff “could benefit both Dell Technologies and VMware shareholders and this will provide more liquidity for Michael Dell and Silver Lake, as per the sources. Michael Dell currently owns 52 percent of Dell Technologies while Silver Lake owns 29 percent. Dell’s market capitalization is now $48.8 billion, while VMware’s is $60.5 billion.
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