In one of the largest corporate spin-offs ever seen, Dell Technologies has revealed it will let go of its 81% stake in virtualization giant VMware, to essentially help create an independent publicly traded software company that boasts of a stock market value of nearly $64 billion.
News of the demerger first came to light earlier this year in April, 2021. Reporting on the completion of the process, the Financial Times says that the move has helped Dell’s founder turn around the PC manufacturer into a broader and significant player in the data center hardware and software segment worth $40 billion.
On the other hand, the demerger also sees VMware regain corporate independence about 18 years after its acquisition by EMC for less than $1 billion.
The separation from Dell will free VMware from EMC’s focus on corporate data centres, and give it more freedom to invest and make acquisitions focusing on cloud computing, Sumit Dhawan, VMware’s president told FT.
One for the books
Founded in 1984, Dell initially went public in 1988, before one of the largest leveraged buyouts ever seen put it back into the private ownership of Michael Dell in 2013. After buying EMC, the company undertook a complex financial move to become public again to help the company raise funds.
Dell had to reportedly borrow about $70 billion to finance its deal-making, which has been weighing it down. As part of the spin-off, VMware will pay a special dividend to shareholders totaling about $12 billion, which according to FT will help Dell take a chunk off the remaining debt load.
After the spin-off, Dell will be “a simpler company with a better capital structure”, Krish Sankar, an analyst at Cowen, told FT.