SAN FRANCISCO: Dell Technologies has announced to spin out VMware - a move that will generate more than USD 9 billion for the company that acquired VMware as part of the USD 58 billion EMC acquisition (announced as USD 67 billion) in 2015.
Dell plans to offer VMware shareholders a special dividend of between USD 11.5 and USD 12 billion. Since it owns approximately 81 per cent of those shares, Dell will generate around USD 9.3-9.7 billion.
"By spinning off VMware, we expect to drive additional growth opportunities for Dell Technologies as well as VMware, and unlock significant value for stakeholders. Both companies will remain important partners, with a differentiated advantage in how we bring solutions to customers," Dell CEO Michael Dell said in a statement late on Wednesday.
The 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. VMware's recent earnings release stated that it had USD 4.715 billion in "total cash, cash equivalents and short-term investments."
"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.
According to VMware, a spin-off from Dell Technologies provides it 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.
"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," Rowe added.
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 companies said.
The estimated value of the USD 11.5 billion to USD 12.0 billion special cash dividend that VMware will provide to all stockholders ranges from USD 27.43 per share to USD 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 year 2021.