Dell sell-off saga gets weird: Subsidiary VMware may buy parent in 'reverse merger'

Buy-out would let Big Mike swerve IPO headaches

By Shaun Nichols in San Francisco

Posted in Data Centre, 29th January 2018 19:13 GMT

Dell's future has been thrown for yet another loop. Dell's virtualization subsidiary VMware is reportedly looking to buy out its parent Dell so that the tech titan can avoid a second IPO.

Under a proposed scheme, the fake computer slinger would take over a real computer maker. Dell picked up VMware when it finally acquired EMC for $67bn in 2016.

VMware would undertake a reverse merger procedure that would then allow Dell to go public – VMware is still listed on the New York Stock Exchange – without the fuss of going through an IPO, CNBC reported today. Currently, Dell owns around 80 per cent of VMware stock, giving it a controlling stake in the direction of the company.

The reverse buyout plan would see VMware pay off Dell founder and chief exec Michael Dell and Silver Lake with shares in the newly acquired entity that could then be sold off for a tidy profit.

Dell has made no secret it is looking to go public and emerge from its self-imposed dark period. With the company's PC business reeling, Michael Dell and Silver Lake bought out Dell's shares for $24.9bn and took the company private back in 2013. Two years later, Dell merged with EMC in what was the largest ever tech acquisition.

Now, with EMC and VMware in tow, Dell is looking to reemerge as a publicly-traded company, and burn off some of the $50bn in debt it has reportedly racked up.

News of the proposed deal did not sit well with VMware shareholders, who sent the outfit's stock plummeting 10 per cent on the news. If Dell and pals intended to strategically leak this news to gauge sentiment, they have their answer. ®

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