TechCrunch has spilled much digital ink moving the fate of VMware since it was brought to Dell’s orbit thanks to the latter company’s epic purchase of EMC in 2016 for $58 billion. That busines saddled the well-known Texas tech company with ponderous obligations. Because the deal left VMware a public busines, albeit one controlled by Dell, how it might be used to pay down some of its mother company’s arrears was a constant question.
Dell drew its move earlier this week, agreeing to spin out VMware in return for a huge one-time bonu, a five-year commercial partnership agreement, lots of stock for existing Dell shareholders and Michael Dell retaining his character as president of its board.
So, where does the distribute leave VMware in terms of independence, and in terms of Dell influence? Dell no longer will hold formal control over VMware as part of the deal, though its shareholders will retain a large stake in the virtualization being. And with Michael Dell staying on VMware’s board, it will retain influence.
Here’s how VMware described it to stockholders in a exhibition this week. The graphic shows that under the new agreement, VMware is no longer a subsidiary of Dell and is now time be an independent company.
But with VMware tipped to become independent once again, it could become something of a merger target. When Dell ascertained VMware thanks to majority ownership, a hostile takeover felt out of the question. Now, VMware is a more possible target to the right company with the right offer — provided that the Dell spinout tasks as planned.
Buying VMware would be an expensive campaign, nonetheless. It’s worth around $67 billion today. Presuming a large premium would be needed to take this particular technology chess piece off the competitive timber, it could cost $100 billion or more to snag VMware from the public markets.
So VMware will soon be more free to pursue a transaction that might be favorable to its shareholders — which will still include every Dell shareholder, because they are receiving stock in VMware as part of its spinout — without am concerned about its mother busines simply saying no.
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