TechCrunch messed up many digital inks that have watched the fate of VMware since it was brought to Dell’s track thanks to the latter’s epic acquisition of EMC in 2016 for $ 58 billion. The deal saddled the well-known Texas tech company with huge debt. Because the agreement leaves VMware a public company, albeit one controlled by Dell, it was an ongoing question how it could be used to pay off some of its parent company’s arrears.
Dell decided earlier this week to hand out VMware in exchange for a huge one-time dividend, a five-year commercial partnership agreement, plenty of stock for existing Dell shareholders and Michael Dell retaining his role as chairman of its board.
So, where does the transaction leave VMware in terms of independence and in terms of Dell influence? Dell no longer holds formal control over VMware as part of the deal, although its shareholders will retain a large stake in the virtualization giant. And with Michael Dell staying on VMware’s advice, it will retain influence.
Here’s how VMware described it to shareholders this week. The graph shows that under the new agreement VMware is no longer a subsidiary of Dell and will now be an independent company.
Image credits: VMware
But with VMware becoming independent again, it could become something of a takeover target. When Dell took control of VMware thanks to majority ownership, a hostile takeover was out of the question. VMware is now a more likely target for the right company with the right offer – provided the Dell spinout works according to plan.
However, buying VMware will be expensive. It’s worth about $ 67 billion today. Assuming that a large premium would be needed to remove this technological chess piece from the competitive board, it could cost $ 100 billion or more to remove VMware from the public markets.
VMware will therefore soon be more free to pursue a transaction that could be beneficial to its shareholders – which will still include every Dell shareholder, because they receive shares in VMware as part of its turnaround – without worrying about its parent company simply no.