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By Lisa Beilfuss And Don Clark 

Dell Inc. and private-equity firm Silver Lake will buy data-storage company EMC Corp. for roughly $67 billion in cash and stock, marking the biggest technology-industry takeover ever.

The $33.15-a-share price tag represents a 28% premium over EMC's closing price before The Wall Street Journal reported last week that the companies were in talks to merge.

Dell said it expects to fund the deal through a combination of new common equity from Chief Executive Michael Dell, Silver Lake and others, the issuance of tracking stock, new debt financing and cash on hand. There are no financing conditions for the closing of the deal, Dell said. Dell recently reported that it had about $12 billion of debt.

Toni Sacconaghi, an analyst at Sanford C. Bernstein, said Dell will need to raise an estimated $45 billion in debt to finance the transaction. "We are a bit surprised that Dell was able to get financing," he wrote in a research note Monday.

The tie-up would mark the culmination of Mr. Dell's longtime quest to transform his company from a personal computer specialist to a one-stop shop capable of serving most technology needs for large companies.

"We see a massive digital transformation that our customers are engaged in," Mr. Dell said in a joint interview with Joe Tucci, EMC's chief executive. Adding EMC's hardware and software strengths to Dell will give the combined company unparalleled capabilities to sell technology to help them, they said.

Mr. Dell, who took his company private in 2012, said it was able to reduce its debt load steadily since then. He plans to significantly pay down the combined company's debt in the 12 to 24 months after the deal closes.

VMware, a pioneer in virtualization software in which EMC owns about an 80% stake, will remain a publicly traded company with Dell as controlling shareholder. Though some analysts had speculated Dell might sell of some of its VMware shares to finance the transaction, Mr. Dell said it plans to keep the stock.

"Over time we could increase our stake," Mr. Dell said.

EMC shares rose 1% to $28.13 in midday trading. VMware stock declined 11% to $70.03, despite reporting preliminary results above Wall Street expectations. Some analysts expressed concerns that issuing tracking stock would effectively create dilution for VMware shareholders.

The EMC-Dell deal, if completed, would create the largest privately held tech company. Chip maker Avago Technologies Ltd.'s pending $37 billion agreement to buy Broadcom Corp. is the next-biggest pure-tech takeover ever struck.

Mr. Tucci will remain 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 his CEO spot for several years and had previously said he and fellow directors might settle the succession question by February 2015.

In the interview, Mr. Tucci said he wanted to see that his company became part of a larger entity to cope with the changes facing the industry. "Put this all together you are going to need to partner," he said.

Mr. Tucci noted in a blog post that the combined company will have about $80 billion in revenue and it will be "far more efficient and effective to operate as a private company," with the ability to "incubate" and more freedom to invest for the long term.

"It's a bittersweet moment," Mr. Tucci said of EMC ending its status as an independent company, though he is at peace with the decision. "I'm in a good place."

Dell, already a major seller of back-end business computers known as servers, has already built a sizable sideline in storage equipment. But the company gets a large proportion of its sales from small and midsize businesses, many of which order gear from Dell's website.

EMC, by contrast, has the broadest line of storage equipment in the industry and an entrenched position at many large companies. It also has multiple software businesses and a collection of sales personnel and partners that help court corporate customers.

Under the deal, EMC holders will receive $24.05 a share in cash in addition to tracking stock linked to a portion of EMC's 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 have slid 14% so far this year, including Monday's decline.

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, which helps IT departments store, manage and protect information, 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.

In a statement Monday, Jesse Cohn, Senior Portfolio Manager at Elliott, said Elliott "strongly supports" the deal.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com and Don Clark at don.clark@wsj.com

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(END) Dow Jones Newswires

October 12, 2015 14:01 ET (18:01 GMT)

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