Just when you thought the M&A boom is over after a surge in bond yields that Goldman has repeatedly dubbed as “recessionary”, and which will make the debt cost of any funding so high that there is barely any room for execution error, moments ago as had been extensively leaked previously, private Dell announced it would acquire tech giant EMC (EMC) in a deal valued roughly $67 billion, while maintaining VMware (VMW) as a publicly-traded corporation.
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. Based on the estimated number of EMC shares outstanding at the close of the transaction, EMC shareholders are expected to receive approximately 0.111 shares of new tracking stock for each EMC share. Assuming, for illustrative purposes, 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 value of the tracking stock may vary from the market price of VMware given the different characteristics and rights of the two stocks.
Those wondering where Dell will get the funds to acquire the tech behemoth, 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.
Good luck with raising the tens of billions in debt the deal will require: our best wish to Barclays, BofA, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, RBC who will all be underwriting the required debt financing to Dell.
The full press release:
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 extremely attractive high-growth areas of the $2 trillion information technology market with complementary product portfolios, sales teams and R&D investment strategies. The transaction combines two of the world's greatest technology franchises with leadership positions in servers, storage, virtualization and PCs and it brings together strong capabilities in the fastest growing areas of the industry, including digital transformation, software-defined data center, hybrid cloud, converged infrastructure, mobile and security.
