Leo Daphne/Dreamstime
In a move that investors had widely anticipated,
late Wednesday announced a plan to spin off its 80.8% stake in
to shareholders. Dell said the deal is expected to close in the 2021 fourth quarter, subject to various conditions, including an IRS letter confirming that the transaction will be tax-free.
Dell (ticker: DELL) had previously said it was considering a spin of its VMware stake.
VMware (VMW) at close would pay a special cash dividend of $11.5 billion to $12 billion to shareholders; Dell would receive between $9.3 billion and $9.7 billion of the total, and would use the cash to pay down debt. Dell said the improved balance sheet should position it for an investment-grade credit rating.
Dell holders would receive 0.44 VMware shares for each Dell share held, subject to adjustment prior to close. The company said VMware would shift from a multiclass to a single-class share structure while Dell Technologies’ share structure would remain the same.
Dell said the two companies would sign a commercial agreement to “preserve the companies’ unique and differentiated approaches to the co-development of critical solutions and alignment on sales and marketing activities.” Dell said VMware (VMW) would continue to use Dell Financial Services to help its customers finance contracts.
“By spinning off VMware, we expect to drive additional growth opportunities for Dell Technologies as well as VMware, and unlock significant value for stakeholders,” Dell CEO and founder
Michael Dell
said in a statement. “Dell Technologies will continue to modernize its core infrastructure and PC businesses and embrace new opportunities through an open ecosystem to grow in hybrid and private cloud, edge and telecom.”
Michael Dell would remain chairman and CEO of Dell Technologies, as well as chairman of the VMware board.
Zane Rowe
would remain interim VMware CEO. The VMware board would be unchanged.
Dell in late trading was up 7.8%, to $99.91. VMware shares were down 0.7%, to $154.36.
Write to Eric J. Savitz at eric.savitz@barrons.com
