Dell decides to go public again in $21 billion share-swap deal

Dell decides to go public again in $21 billion share-swap deal

The world's largest private technology company will exchange each share of VMware tracking stock (DVMT.N) for 1.3665 shares of its Class C common stock, or $109 per share in cash for a total cash consideration of not more than $9 billion. The company announced a stock swap deal with its software subsidiary VMware that will result in a reorganised tech giant that returns to the stock market, with founder Michael Dell retaining control as chairman and chief executive. The company intends to exchange outstanding V tracking stock for Class C common stock of Dell Technologies or an optional cash choice.

Dell in its early years focused on commercial clients, but that changed in the late 1990s when it garnered a huge following among techies who desired more options in customizing PCs.

The transaction will allow Dell to bypass the traditional IPO process, which would likely have involved grilling by stock market investors over its $52.7 billion debt pile.

Five years ago, Michael Dell took his pioneering PC and server company private, citing a desire to avoid the short-term thinking that can consume public companies.

Dell, which owns 80 percent of VMware, issued the tracking stock in 2016 to fund its purchase of data storage firm EMC Corp. Silver Lake will keep its 24 per cent minority stake.

At time of publication, Dell was trading up 7.7 percent at $91.10, and VMware was up 5.4 percent at $155. (NYSE: VMW) announced a one-time special dividend valued at $11 billion. EMC owned the majority stake in VMware, which Dell inherited.

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The tracking stock has almost doubled in value since it was issued, closing Friday at $84.58.

VMware shareholders will choose between receiving cash or stock in the transaction.

"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 said in a prepared statement on Monday.

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.

Should Dell become a public company once again, it's not entirely clear what will happen to VMware - although it should be possible for it to continue to operate as it now does.

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