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VMware tracking stock is history, as Dell preps for public trading

It’s official: Dell Technologies once again will become a public company, after gaining hard-won approval to buy back VMware tracking stock from shareholders in a transaction approaching $24 billion.

Dell said 61% of VMware shareholders approved of the deal, capping months of sometimes-contentious negotiations between Dell and stockholders in its VMware virtualization subsidiary. The VMware tracking stock mirrors the performance of VMware, which closed the last quarter with $2.2 billion in revenue, up 15%.

The deal paves the way for Dell to start trading on the New York Stock Exchange by Dec. 28, without hiring an investment bank to underwrite the offer. The financial maneuvering is not expected to have material impact on Dell EMC storage customers, although it simplifies the Dell-EMC-VMware corporate structure and provides liquidity for investments and paying down roughly $53 billion in merger-related debt.

In going public, Dell said it will convert 199 million shares of the VMware tracking stock to newly created Dell Class C common shares. Shareholders will have the option to convert the shares or receive $120 in cash per share, without interest and subject to an aggregate cap of $9 billion. Dell boosted the VMware buyback price from its initial $109 per share after activist investor Carl Icahn sued the company. Icahn subsequently dropped his lawsuit last month following after Dell upped the offer.

Dell authorized 343 million shares of VMware tracking stock as a blandishment to win over EMC shareholders during merger negotiations.

Dell has been selling off assets since the merger, including services and software it claims no longer mesh with its long-term growth strategy. The vendor has entertained various scenarios since the start of the year, which included a potential reverse merger with VMware and an IPO to spin out Dell EMC as a separate company.

Dell went private in 2013 to escape the scrutiny of Wall Street, completing a $24.5 billion leveraged buyout by equity firm Silver Lake Partners, which subsequently helped Dell buy EMC and retains about 18% of the computer company.

 

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