Dell Technologies will once again go public, less than two years after merging with EMC and VMware.
The listing will be facilitated by the exchange of issued stock for common stock, and will be largely funded by a special dividend from subsidiary VMware.
Michaell Dell, chairman of Dell Technologies and VMware, wrote an open letter to staff and shareholders, pointing out that the merged company has outperformed the ambitious expectations it had set.
“Together, we’ve delivered strong financial results, continued share gains across the portfolio, and enjoyed richer customer and partner relationships due in large part to our better together value proposition,” he writes.
Following a review by an independent special committee, the company has decided to enter the public market by exchanging the outstanding Class V tracking stock, which was issued at the time of the Dell and EMC combination, for Dell Technologies common stock, he adds.
“Tracking stock shareholders will have the option to exchange their shares or cash out at a 29% premium to the tracking stock closing price. Contingent on the exchange transaction, VMware will offer a cash dividend to all stockholders, including Dell Technologies.”
He says the transaction will have little impact on day-to-day operations other than simplifying the capital and ownership structure and providing public investors the opportunity to share in the value creation of Dell Technologies in its entirety.
“For our customers and partners, nothing changes. All of our companies, Dell, Dell EMC, VMware, Pivotal, RSA, Secureworks and Virtustream, will continue to operate as they currently do.
“We remain committed to delivering a robust portfolio of solutions and services to address your IT needs from edge to core to cloud, investing in industry-leading innovation, and making it easier for you to transact across the Dell Technologies family of businesses.
“And as a public company, we will keep the same strategic focus on long-term growth that has helped us strengthen, reshape and grow our business.”
VMware has announced an $11-billion one-time special dividend pro-rata to all VMware stockholders. Dell Technologies will use its dividend proceeds to facilitate the transaction, which is expected to be completed in the fourth quarter of calendar year 2018.
At the conclusion of these transactions VMware will remain an independent publicly-listed software company, with improved alignment between Dell’s economic and ownership interests in VMware.
Pat Gelsinger, CEO of VMware, comments: “We are pleased to be in a position to return capital to stockholders through this 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.”
Paul Sagan, lead director of VMware, adds: “The VMware Board of Directors has strong governance practices in place and we are confident that the actions announced today create value for, and protect the interests of, all stockholders.
“As part of this transaction, VMware has entered into a governance agreement with Dell Technologies that provides for continued strong governance for our stockholders. We believe Dell’s proposal will simplify VMware’s equity capital structure to the benefit of all of our stockholders through the elimination of the tracking stock.”
“VMware has thrived as part of the Dell Technologies family and has seen tremendous traction and strategic relevance with all customers, resulting in significant revenue growth and financial performance,” says Dell. “After the transaction concludes, I am looking forward to VMware’s continued independent status, strategy and capital allocation policy for organic investment, M&A and shareholder returns.”