Business

Dell decides to go public again in $21 billion share-swap deal

The computing giant will list on the New York Stock Exchange nearly five years after CEO Michael Dell took the business private.

Written by Natalie Gagliordi, Contributor July 2, 2018 at 8:15 a.m. PT

In its latest turn of corporate machination, Dell Technologies has decided to return to the public market via a cash and share-swap deal that's meant to help the company boost revenue and raise funds.

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The computing giant plans to convert existing Class V tracking shares into Class C common stock to form a publicly traded company with a market capitalization of $21.7 billion. Dell's stock will list on the New York Stock Exchange.

Dell Technologies founder and CEO Michael Dell took his company private nearly five years ago after more than two decades on the stock market in a deal worth $24 billion. In 2016, Dell acquired EMC in a massive $67 billion deal. The agreement also included EMC's majority stake in VMWare, which now has a market cap of around $50 billion, as well as ownership of Pivotal, SecureWorks, RSA and VirtuStream.

Earlier this year, Dell disclosed that it was considering a reverse merger with VMware as part of its public market return. While that scenario didn't quite play out, VMware is still integral to Dell's strategic maneuvering. VMware is financing the cash component of the deal with a one-time, $11 billion special dividend paid pro-rata to its shareholders.

Once the deal closes, DVMT shareholders (Class V shareholders) will own between 20.8 percent and 31 percent of Dell depending on cash election amounts.

"Over the last five months, with the assistance of our independent financial and legal advisors, we have conducted a thorough evaluation of a number of alternatives to maximize stockholder value," said a special committee of VMware directors.

Michael Dell, who will continue on as CEO and chairman after the deal, said he remains committed to the company's long-term strategy and the independence of VMware.

"Unprecedented data growth is fueling the digital era of IT, and we are uniquely positioned with our portfolio of technologies and services to enable the digital, IT, security and workforce transformations of our customers," he said. "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."

Going forward, industry analyst Patrick Moorhead expects Dell to capitalize on its most profitable market opportunities, including IoT, the edge, AI and connectivity, all buttressed by software and services from VMware, RSA, Secureworks and Pivotal.

"Dell loses its ability to be as nimble from quarter to quarter, but the reality is that it had to file quarterly reports anyways, given its VMware stake," said Moorehead. "The street will scrutinize its GAAP versus non-GAAP numbers but as I have tracked those numbers for years, the two have come closer together."

"Paying down the debt will be key, but given some giant, industry downturn, I don't see that as an issue," Moorhead added. "The company paid down 25 percent of its $42 billion debt in two years and cash flow is strong."