Dell Technologies Eyes VMware Spin-Off
July 17, 2020
Technologies is exploring a potential spin-off of its 81% equity ownership
interest in VMware. Although this exploration is in an early stage, Dell
Technologies believes a spin-off could benefit both Dell Technologies and VMware
shareholders, team members, customers and partners by simplifying capital
structures and creating additional long-term enterprise value. Any potential
spin-off would not occur prior to September 2021 and would be intended to
qualify as tax-free for U.S. federal income tax purposes.
Additionally, Dell Technologies continues to evaluate a range of strategic
options concerning its ownership interest in VMware, including maintaining its
current ownership in the company.
“The strategic relationship between Dell Technologies and VMware has never been
stronger,” said Michael Dell, chairman and chief executive officer, Dell
Technologies. “For more than 20 years, we’ve innovated for our customers and
created substantial growth and value for both companies and our teams.
Regardless of the options we are exploring to create additional value, we are
accelerating our strategy - which remains unchanged. We are focused on winning
in the consolidating markets where we operate and innovating across the Dell
Technologies portfolio to create integrated solutions that turn data into
insights and action.”
As part of its exploration of a potential spin-off, Dell Technologies expects it
would seek to formalize mutually beneficial commercial arrangements similar to
those currently in place. This includes go-to-market, services, research and
development, and intellectual property agreements between Dell Technologies and
VMware, providing ongoing strategic benefits and continued support for customers
of both companies following any spin-off.
If it determines to pursue a spin-off, Dell Technologies also expects to
negotiate and agree to certain related terms and conditions with a special
committee of the Board of Directors of VMware and the Board of Directors of
VMware. In that event Dell Technologies would look to negotiate the payment of a
special cash dividend by VMware that would be paid on a pro rata basis to all
is important to Dell Technologies that both companies have appropriate capital
structures immediately following any spin-off. Dell Technologies’ goal would be
to maintain VMware’s credit rating of investment grade and improve Dell
Technologies’ credit rating at the time of or shortly following a potential
spin-off and accelerate the timeline through which Dell Technologies can achieve
an investment grade credit rating. However, Dell Technologies can give no
assurance that any specific ratings would ultimately be obtained for either
company in the event of a spin-off.
Dell Technologies is the market leader and continues to gain share through its
growing client and infrastructure businesses, including PCs, peripherals,
mainstream servers, external storage, and cloud. “No other company can match the
depth and breadth of Dell Technologies’ portfolio. Our business is strong and
has runway to grow for decades to come,” said Michael Dell.
Additional information regarding this announcement can be found in the amended
Schedule 13D filed by Dell Technologies with the United States Securities and
Exchange Commission (SEC) on July 15, 2020.