Dell all-hands staff letter says EMC takeover funds are in the bag

VMware's falling shares means the merger will be cheaper, which may help

Dell has written to its global workforce, advising them that its transaction to acquire EMC is on track.

In a letter recorded by to the United States Securities and Exchange Commission (SEC), Dell chief integration officer Rory Read says

“I want to address some of the chatter over the past few weeks about possible financing headwinds with the [EMC] transaction.”

“ I can assure you any suggestions our debt financing is in jeopardy are off-target and do not reflect our financing terms and the progress of our financing to date. The debt financing is fully-committed and is being underwritten by many of the leading global banks.”

Read goes on to say that “syndicating and placing the debt for a transaction of this nature frequently encompasses a time period of several months from start to finish. That process currently is underway and remains on track, as planned. We anticipate closing the transaction sometime in the May – October timeframe, as originally communicated, subject to achieving customary closing conditions.”

The letter goes on to advise that “~20% of our global employee base to ask opinions of the Dell | EMC combination” in a survey that asks the following:

  • How well we’ve articulated the reason for joining our two companies
  • How satisfied you are with the level of communication about the integration
  • How confident you are that the deal will yield positive results

Read adds that Dell will do more such surveys, quarterly.

The letter to staff comes after another SEC filing, made last Friday, warned that recent downward movements in VMware's share price mean EMC shareholders are going to wind up worse off.

“Between the date the merger agreement was entered into and the date of this proxy statement/prospectus, the market value of the VMware Class A common stock has declined, thereby reducing the implied value of the stock portion of the merger consideration,” the document explains. “Changes in the market value of the VMware Class A common stock also will impact the amount of cash that holders of EMC common stock will receive in the merger in lieu of fractional shares of Class V Common Stock.”

The “Class V” stock is the “tracking stock” to be awarded to EMC shareholders so they still have a stake in VMware's hoped-for growth.

This new prospectus indicates that VMware's falling share price means Dell thinks it can pay less to acquire EMC. That's good news for Dell but unwelcome for EMC and its investors. ®

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