Dell to buy EMC for $67-bn in largest tech acquisition
12 October 2015
US computer maker Dell Inc today tabled a $67 billion takeover bid for data storage company EMC Corp, a deal which would be the largest acquisition in the technology industry.
Under the terms of the offer the friendly deal, Dell has offered to pay $24.05 per share in cash and the rest in a special stock that values the majority stake held by EMC in virtualization software company VMware Inc.
The total deal value is $33.15 per share in cash and special stock.
EMC's board has approved the merger and intends to recommend that the company's stockholders approve the deal, but the agreement has a provision that allows EMC to talk to other potential bidders.
Dell, based in Texas, plans to fund the deal through a combination of new equity from founder and CEO Michael Dell, MSD Partners, Silver Lake and Singapore's sovereign wealth fund Temasek Holdings as well as the issuance of the tracking stock, new debt and cash on hand.
VMware, in which EMC holds about 80-per cent stake, will remain an independent, publicly traded company.
Michael Dell will lead the combined company as chairman and chief executive and Dell's headquarters will remain in Round Rock, Texas, and the headquarters of the combined enterprise systems business will be located in Hopkinton, Massachusetts.
The deal, which needs approval from EMC shareholders, is expected to close next year.
EMC had acquired VMware in 2004 for $625 million in cash and sold 15 per cent of the company in 2007 in a New York Stock Exchange IPO.
VMware is currently valued at $32.3 billion, while EMC has a market cap of $53.6 billion.
The proposed deal would further strengthen the world's third-largest personal computer maker's presence in the corporate sector at a time when Michael Dell had been trying to transform the company into a complete provider of enterprise computing services like Hewlett-Packard Co and IBM.
EMC has been under pressure from activist investor and shareholder Elliott Management Corp, which was pushing the company to spin off its majority-owned VMware Inc unit.
Dell went private in a roughly $25 billion buyout by Michael Dell, and private-equity firm Silver Lake and has since been looking for play in more-profitable areas like storage and security (See: Michael privatises Dell, delists from Nasdaq).
The deal would see Dell transition from a consumer-facing company to one focused on technology for large corporations - a very different company from the one Dell founded in his University of Texas dorm room in 1984.
Dell still carries over $11.7-billion in debt, according to FactSet and EMC is probably worth twice as much as Dell itself, with 70,000 employees worldwide.
The merger would also create the world's largest privately-controlled, integrated technology company. The company will be a leader in high-growth areas of the $2 trillion information technology market with complementary product portfolios, sales teams and R&D investment strategies.
Dell said that the transaction combines two of the world's greatest technology franchises with leadership positions in servers, storage, virtualization and PCs and it brings together strong capabilities in the fastest growing areas of the industry, including digital transformation, software-defined data center, hybrid cloud, converged infrastructure, mobile and security.
''The combination of Dell and EMC creates an enterprise solutions powerhouse bringing our customers industry leading innovation across their entire technology environment. Our new company will be exceptionally well-positioned for growth in the most strategic areas of next generation IT including digital transformation, software-defined data center, converged infrastructure, hybrid cloud, mobile and security,'' said Michael Dell.
''Our investments in R&D and innovation along with our privately-controlled structure will give us unmatched scale, strength and flexibility, deepening our relationships with customers of all sizes. I am incredibly excited to partner with the EMC, VMware, Pivotal, VCE, RSA and Virtustream teams and am personally committed to the success of our new company, our customers and partners,'' he added.