Credit & Capital

Dell Spins Off VMware

The computer company will shed its 81% stake in VMware, creating an independent software company with a stock market value of $64 billion.
Lauren MuskettNovember 1, 2021

Dell Technologies will shed its 81% stake in VMware this week, creating an independent software company with a stock market value of $64 billion, Financial Times reports.

The separation from Dell will free VMWare from Dell’s focus on corporate data centers and give it more freedom to invest and make acquisitions focusing on cloud computing.

Dell, buoyed by the work-from-home boom in PC sales, is now pinning its hopes on the new market for “edge computing,” as some of the computing power in centralized cloud data centers moves to smaller, local facilities closer to users.

Dell stockholders will receive .440626 of a share of VMware common stock, Class A for each share of Dell held as of October 29. Each share of VMware Class B will convert into one share of VMware Class A common in connection with the distribution before the receipt by Dell’s stockholders of such shares.

The distribution will likely complete on November 1. 

Dell’s remaining hardware operations have an implied value of $33 billion, based on its latest share price. 

Dell acquired server and storage company EMC for $67 billion before retaking the group public in 2018. Michael Dell fought with shareholders over claims that he bought Dell cheap and used complex financial engineering in the EMC deal to short-change investors.

Silver Lake, a private equity firm that helped mastermind the deal, will retain stakes in Dell and VMware worth $11 billion.

Dell had to borrow $70 billion to finance its deal. 

VMware pays a special dividend to shareholders of about $12 billion, helping Dell lighten a remaining net debt load. 

Price Action: VMware shares closed lower by 0.3% at $151.70 on Friday.

This story originally appeared on Benzinga. © 2021

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