. has been spilled Much digital ink has followed the fate of VMware since it was brought into orbit by Dell thanks to the company’s epic purchase of EMC in 2016 for $ 58 billion. This transaction placed the well-known Texan technology company in heavy debt. With VMware being a publicly traded company as a result of the deal despite being controlled by Dell, it was a constant question of how it could be used to make up some of its parent company’s backlog.
Dell took its step earlier this week and agreed to outsource VMware in exchange for a huge one-time dividend, a five-year commercial partnership agreement, lots of stock for existing Dell shareholders and Michael Dell, who will retain his role as CEO.
Where is VMware in terms of independence and Dell influence? Dell will no longer have formal control of VMware as part of the deal, although its shareholders will retain a large stake in the virtualization giant. And if Michael Dell stays on VMware’s board of directors, influence will remain.
That’s how VMware described it to shareholders in a presentation this week. The graphic shows that under the new agreement, VMware is no longer a subsidiary of Dell and will now be an independent company.
But if VMware becomes independent again, it could become a takeover target. When Dell controlled VMware thanks to its majority stake, a hostile takeover was out of the question. Now VMware is a more possible target for the right company with the right offering – assuming the Dell spinout works as planned.
However, buying VMware would be an expensive expense. It’s worth around $ 67 billion today. Assuming a high premium was required to take this particular technology pawn off the competition board, it could cost $ 100 billion or more to drive VMware out of public markets.
VMware will therefore soon be freer to conduct a transaction that could be beneficial to its shareholders – which every Dell shareholder continues to belong to as they receive shares in VMware as part of their spin-off – without having to worry about the parent company simply says no.