Dell announced today that it plans to purchase EMC for $67 billion, making it the largest technology purchase in history. With the acquisition of EMC, Dell can expand its storage business instantly making it one of the most sought after storage providers on the market.
“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,” Michael Dell, CEO of Dell, said in a press release statement. “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.”
The end-to-end product portfolio that Dell will be able to offer now will benefit the consumers the most in the $2 trillion IT market. The combined company will consist of strategically-aligned businesses and incubated high-growth assets, fostering innovation, enabling customer choice and attracting and retaining world-class talent.
“I’m tremendously proud of everything we’ve built at EMC – from humble beginnings as a Boston-based startup to a global, world-class technology company with an unyielding dedication to our customers,” said Joe Tucci, chairman and chief executive officer of EMC. “But the waves of change we now see in our industry are unprecedented and, to navigate this change, we must create a new company for a new era. I truly believe that the combination of EMC and Dell will prove to be a winning combination for our customers, employees, partners and shareholders.”
Financially, EMC stockholders will receive about $24.05 per share in a combination of cash as well as tracking stock linked to a portion of EMC’s economic interest in the VMware business. VMware will remain as an independent publicly traded company, so nothing will change on that front. Assuming, for illustrative purposes, a valuation for each share of tracking stock of $81.78, the intraday volume-weighted average price for VMware on Wednesday, October 7, 2015, EMC shareholders would receive a total combined consideration of $33.15 per EMC share and the total transaction would be valued at approximately $67 billion. The value of the tracking stock may vary from the market price of VMware given the different characteristics and rights of the two stocks.
With both EMC and Dell board of directors already approving the merger agreement, EMC is requesting the stockholders to approve the agreement as well.
Mr. Dell and related stockholders will own approximately 70 percent of the company’s common equity, excluding the tracking stock, similar to their pre-transaction ownership. The transaction is expected to close in the second or third quarter of Dell’s fiscal year ending February 3, 2017 which means within the May to October 2016 time-frame.