Dell to Buy EMC for $67 Billion --2nd Update
October 12 2015 - 8:06AM
Dow Jones News
By Lisa Beilfuss
Dell Inc. and private-equity firm Silver Lake will buy EMC Corp.
for roughly $67 billion in cash and stock, marking one of the
largest technology-industry takeovers ever.
The $33.15 a share price tag represents a 19% premium over
Friday's closing price for EMC.
Dell said it expects to fund the deal through a combination of
new common equity from Chief Executive Michael Dell, Silver Lake
and other, the issuance of tracking stock, as well as new debt
financing and cash on hand. There are no financing conditions to
the closing of the transaction, Dell said. Dell recently reported
that it had about $12 billion of debt.
The companies expect to complete the transaction between May and
October of 2016. Dell said the combined company "will focus on
rapidly de-levering" in the first 18 to 24 months after the deal
closes.
The Wall Street Journal had reported last week that the
companies were in talks to merge.
Joe Tucci, EMC's long-time Chief Executive, will be chairman and
CEO of EMC until the transaction closes. Upon completion, Mr. Dell
will lead the combined company as chairman and CEO. Mr. Tucci, 68
years old, has considered giving up the CEO spot for several years
and had previously said he and fellow directors might settle the
succession question by February 2015.
VMware, in which EMC owns about 80%, will remain a publicly
traded company. EMC holders will receive $24.05 a share in cash and
in addition to tracking stock linked to a portion of EMC's economic
interest in the VMware business. VMware has a market value of about
$33 billion. Dell said EMC shareholders are expected to receive
about 0.111 shares of new tracking stock for each EMC share. Shares
of VMware closed at $78.65 Friday.
The value of the tracking stock may vary from the market price
of VMware given the different characteristics and rights of the two
stocks, Dell said.
EMC said late last year that it was exploring strategic options.
The company has been under pressure to boost its stock price since
last year, when activist hedge fund Elliott Management Corp. took a
roughly 2% stake in the company and urged it to spin off VMware,
which has a market value of $34 billion. An arrangement struck in
January between Elliott and EMC that had barred the fund from
publicly pressuring EMC expired last month.
The tie up comes about two years after Dell went private in a
roughly $25 billion buyout by its founder, Mr. Dell, and Silver
Lake. Dell has since pivoted from personal computers, pinched by
demand for tablets and smartphones, toward more-profitable areas
like storage and security. The EMC acquisition helps cement Dell's
transition from a consumer-facing company to one focused on
technology for large companies, and it gives it the breadth to
compete more effectively with larger companies such as
International Business Machines Corp., Hewlett-Packard Co., Cisco
Systems Inc. and Oracle Corp.
EMC had earlier been in talks with Dell, The Wall Street Journal
reported last September. The Hopkinton, Mass., company also had
been in discussions about a merger with Hewlett-Packard Co., which
ended before H-P announced plans to split itself in two in October
2014.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 12, 2015 07:51 ET (11:51 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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