A logo of Dell Technologies is seen at the Mobile World Congress in Barcelona, Spain February 28, 2018.
In the five years Dell was privately held, cloud computing has soared, diminishing legacy companies that sell hardware-Dell's key businesses as a maker of servers and storage gear.
Dell plans to exchange each share of the DVMT tracking stock for 1.3665 shares of Dell Technologies common stock for US$109 per share.
The transaction "has merit, after notable financial and operational performance gains since Dell went private", said Anand Srinivasan, technology analyst at Bloomberg Intelligence, adding that "Dell's stock issue comes with high expectations, particularly versus Hewlett Packard Enterprise and NetApp". Holders of the Class V stock can also elect to take a $109/per share cash consideration, a 29% premium to the Class V share closing price prior to announcement.
Shares in DVMT, which last closed at $84.58, rose 13% in premarket trading.
The transaction will allow Dell to bypass the traditional IPO process, which would likely have involved grilling by stock market investors over its $52.7 billion debt pile. (NYSE: VMW) announced a one-time special dividend valued at $11 billion. While the tracking stock that would facilitate the change has doubled in value, Michael Dell has previously stated a preference for being a private company - which Dell has been since 2013.
DVMT has nearly doubled since the stock was issued, closing at $84.58 on Friday, and they were up 8 percent at 9:38 a.m.in New York Monday.
"Unprecedented data growth is fueling the digital era of IT, and we are uniquely positioned with our portfolio of technologies and services to enable the digital, IT, security and workforce transformations of our customers". Dell reported consolidated adjusted cash flow of $2.4 billion in its latest quarter, up by a third year-on-year.
After the deal, VMware shareholders would own between 20.8% to 31% of Dell depending on how many investors opt for cash, Dell said. Its total debt has also gone down by $4.6 billion since the EMC deal.
Billionaire Carl Icahn is deciding whether to challenge Michael Dell in VMware, sources told The Post.