Here’s how Dell is going public again


Dell Technologies is going public again.

On Monday the enterprise technology vendor and PC maker announced that it would be listing itself once again on the New York Stock Exchange after offering to buy out the investors who still held tracking stock – that is, stock tied to a specific division’s performance – in its virtualization subsidiary VMWare, which was acquired as part of the EMC Corp. acquisition.

As explained by Fortune, Dell’s $67 billion acquisition (all figures USD) of VMWare parent EMC two years ago included only an 80 per cent stake in VMWare, with investors controlling the remaining 20 per cent via tracking stock.

Dell’s plan is to now purchase that stock using $21.4 billion worth of shares in itself, with VMWare investors being offered 1.3665 shares in the new Dell stock for each tracking stock they own, or a $109 cash buyout (the tracking stock closed at $84.58 on Friday) that will be funded by a one-time $11 billion dividend from VMWare. (Dell has announced it will only pay investors up to $9 billion in cash however.)

In a July 2 press release Dell chair and CEO Michael Dell, who currently owns 72 per cent of Dell’s common shares and is likely to retain between 47 and 54 per cent stake in the company once the deal is completed, according to Bloomberg, praised the deal as a chance to help the company enter its “next chapter.”

“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 in the statement. “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.”

Many analysts see the deal as a loss for VMWare stockholders, according to Bloomberg, since VMWare has a market cap of $66 billion and is growing more quickly than Dell, which will continue to retain only 80 per cent ownership in the division.

In its release, Dell emphasized that the plan offered investors a 29 per cent premium prior to the announcement, and that stockholders would eventually own between 20.8 per cent and 31 per cent of Dell Technologies, which is valued at between $61.1 and 70.1 billion and generated $21.4 billion in revenue during its most recent quarter, a 19 per cent increase over last year.

The company’s net loss decreased during the same period, by 55 per cent to approximately $500 million.

Dell also noted that during the preceding 12-month period it generated $82.4 billion in revenue, with a net loss of $2.3 billion.

VMWare, meanwhile, praised the deal as well, with CEO Pat Gelsinger issuing a statement of his own that said the company was “pleased to be in a position to return capital to stockholders through [a] one-time special dividend, which is the result of the exceptional performance of our business and our broad-based portfolio’s strong cash flow generation.”

“We remain laser-focused on our strategy to deliver innovative software that drives customer success as a strategic and growing independent entity,” Gelsinger said.