VMware and Dell Technologies Reach Agreement Regarding Spin-Off

Dell Technologies to Spin-off 81% Equity Ownership of VMware, Positioning VMware for Further Growth

Provides VMware with Strategic and Operational Flexibility while Preserving Dell Technologies Strategic Partnership

VMware to Pay $11.5B-$12.0B Special Cash Dividend to All Stockholders; Committed to Investment Grade Rating

The VMware (NYSE: VMW) Special Committee of independent directors and Dell Technologies have agreed to terms in which VMware will be spun-off from Dell Technologies. The terms include significant simplification to the corporate ownership structure and an $11.5B to $12.0B special cash dividend recommended by the independent Special Committee and declared by the VMware Board to all VMware stockholders immediately prior to the spin-off and subject to the satisfaction of all closing conditions. Dell Technologies stockholders will receive a pro-rata distribution of VMware shares held by Dell Technologies, and Michael Dell and Silver Lake Partners will own direct interests in VMware. The two companies have also finalized a commercial agreement that preserves and enhances their strategic partnership to deliver joint customer value.

VMware’s vision is to create a ubiquitous software and SaaS platform across all clouds and hardware infrastructure that helps accelerate customers’ digital transformation. A spin-off from Dell Technologies provides VMware increased freedom to execute its strategy, a simplified capital structure and governance model and additional strategic, operational and financial flexibility, while maintaining the strength of the two companies’ strategic partnership.

“We will have an enhanced ability to extend our ecosystem across all cloud vendors and on-premises infrastructure vendors and a capital structure that will support growth opportunities,” said Zane Rowe, chief financial officer and interim chief executive officer, VMware. “Our strategic partnership with Dell Technologies remains a differentiator for us, and, as we execute on our multi-cloud strategy, we continue to provide customers our solutions and services on any public cloud and any infrastructure.”

In connection with Dell Technologies’ Schedule 13D amendment filed on July 15, 2020, the VMware Board formed a Special Committee of independent directors that retained legal and financial advisors to review and evaluate any potential proposal from Dell Technologies concerning business opportunities outlined in the Dell Technologies filing. The Special Committee evaluated and recommended approval of the transaction and special cash dividend by VMware’s Board of Directors.

“The VMware Special Committee is confident that the spin-off agreement will benefit all stockholders by establishing a simplified capital structure, positioning VMware well to execute on its strategy,” said Paul Sagan, lead independent VMware board member, special committee member and chair of the Compensation and Corporate Governance Committee.

“By spinning off VMware, we expect to drive additional growth opportunities for Dell Technologies as well as VMware, and unlock significant value for stakeholders,” said Michael Dell, chairman of the board, VMware. “Both companies will remain important partners, with a differentiated advantage in how we bring solutions to customers.”

Through its commercial agreement, VMware and Dell Technologies will continue to collaborate and co-engineer solutions that provide strategic value to customers, with Dell Technologies providing go-to-market scale for VMware’s product portfolio.

The spin-off will provide VMware increased strategic, operational and financial flexibility and agility to drive its growth strategy. This includes simplifying capital allocation decisions and eliminating the current dual class stock structure. In addition, VMware remains committed to an investment grade rating and profile.

The estimated value of the $11.5B to $12.0B special cash dividend that VMware will provide to all stockholders ranges from $27.43 per share to $28.62 per share, based on outstanding shares as of March 16, 2021.

The transaction is expected to close during the fourth quarter of calendar 2021, subject to certain conditions.

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