Under the terms of the agreement, EMC shareholders will receive $24.05 per share in cash in addition to tracking stock linked to a portion of EMC’s economic interest in the VMware business. EMC shareholders are expected to receive approximately 0.111 shares of new tracking stock for each EMC share. Assuming a valuation for each share of tracking stock of $81.78, the intraday volume-weighted average price for VMware on Wednesday, October 7, 2015, EMC shareholders would receive a total combined consideration of $33.15 per EMC share and the total transaction would be valued at approximately $67 billion.
The EMC Board of Directors approved the merger agreement and intends to recommend that stockholders of EMC approve the agreement.
The combination of Dell and EMC will create the world’s largest privately-controlled, integrated technology company. The company will be a leader in the high-growth areas of the $2 trillion information technology market with complementary product portfolios, sales teams and R&D investment strategies.
"The combination of Dell and EMC creates an enterprise solutions powerhouse bringing our customers industry leading innovation across their entire technology environment. Our new company will be exceptionally well-positioned for growth in the most strategic areas of next generation IT including digital transformation, software-defined data center, converged infrastructure, hybrid cloud, mobile and security," said Mr. Dell.
VMware will remain a publicly-traded company and continue to provide software- defined data center technology, together with its cloud, mobile and desktop offerings.
The transaction is expected to be financed through a combination of new common equity from Michael S. Dell, MSD Partners, Silver Lake and Temasek, the issuance of tracking stock, as well as new debt financing and cash on hand.
Mr. Dell and related stockholders will own approximately 70 percent of the company’s common equity, excluding the tracking stock, similar to their pre-transaction ownership.
Following completion of the transaction, Mr. Dell will lead the combined company as chairman and chief executive officer. Joe Tucci will continue as chairman and chief executive officer of EMC until the transaction closes. Dell’s headquarters will remain in Round Rock, Texas, and the headquarters of the combined enterprise systems business will be located in Hopkinton, Mass.
The transaction is subject to customary conditions, including receipt of required regulatory and EMC stockholder approvals. The companies expect the transaction to close in the second or third quarter of Dell’s fiscal year ending February 3, 2017 (within the months of May to October 2016).