In a massive deal aimed at creating the largest privately controlled integrated technology company, Dell has signed an agreement to acquire storage provider EMC for approximately $67 billion.
Dell and EMC have complementary product portfolios, sales teams, and research and development investment strategies, Dell said. In addition to holding strong positions in servers, storage, virtualization, and PCs, the combined company will emphasize capabilities geared toward fast-growing areas such as digital transformation, software-defined data centers, the hybrid cloud, converged infrastructure, mobile devices, and security, according to the vendor. In addition, Dell said the deal will bring together its strength in small business and midmarket customers with EMC's position in large enterprises.
EMC shareholders would receive $24.05 in cash per share, as well as approximately 0.111 shares per EMC share of new tracking stock that's linked to a portion of EMC's economic interest in its VMware business. The tracking stock's value may vary from the market price of VMware given the different characteristics and rights of the two stocks, but an estimate based on the intraday average share price on October 7 would result in a total combined payout for EMC shareholders of $33.15 per EMC share and a total transaction value of approximately $67 billion. VMware will remain an independent, publicly traded company.
Dell said it plans to finance the acquisition via a combination of new common equity from Dell's founder, chairman, and CEO, Michael Dell, and investment firms MSD Partners, Silver Lake, and Temasek; the issuance of tracking stock; new debt financing; and cash on hand.
Mr. Dell and related stockholders will own approximately 70% of the company's common equity, excluding the tracking stock. He will also lead the combined company as chairman and CEO, while the current EMC chairman and CEO, Joe Tucci, will remain in that role until the deal is completed. While Dell's headquarters will remain in Round Rock, TX, the headquarters of the combined enterprise systems business will be based at EMC's office in Hopkinton, MA.
The deal is subject to customary closing conditions such as required regulatory and EMC stockholder approvals, and it is expected to close between May and October 2016.
