Dell Technologies to Spin Out its 81% Equity Ownership of VMware

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Dell Technologies has announced its spinning out its 81 per cent equity ownership of VMware to form two standalone companies to strengthen its growth in the data area.

The two companies will enter into a commercial agreement that will preserve the companies’ unique and differentiated approaches to the co-development of critical solutions and alignment on sales and marketing activities. VMware will continue to use Dell Financial Services to help its customers finance their digital transformations. The transaction will simplify capital structures and create additional long-term enterprise value. VMware will distribute a special cash dividend of $11.5 – $12 billion to all VMware shareholders, including Dell’s at the transaction closing.

Based on Dell Technologies’ current 80.6 per cent ownership in VMware, Dell Technologies would receive approximately $9.3 – $9.7 billion which it intends to use the net proceeds to pay down debt, positioning the company well for Investment Grade ratings.

The company says “The transaction will simplify capital structures and create additional long-term enterprise value. VMware will distribute a special cash dividend of $11.5 – $12 billion to all VMware shareholders, including Dell Technologies at the transaction closing during the fourth quarter of 2021”.

With an even stronger capital structure, Dell Technologies is poised to further capitalize on the rebound in infrastructure and PC spend, new cloud operating models driving aaS growth, compute moving to the edge, and customers’ longer-term digital transformation initiatives. With a strong commercial agreement in place, Dell Technologies will have the ability to continue to work closely with VMware to drive innovation and preserve go-to-market synergies while generating new growth opportunities through an open ecosystem.

With technology at the centre of the world’s recovery, Dell Technologies is focused on strengthening the company’s leadership position in growing technology infrastructure and client markets. IT also building on Expanding into new growth areas of hybrid cloud, edge, 5G, telecom and data management to deliver a modern customer experience in the do-from-anywhere economy, including moving quickly toward cloud operating and consumption models under the APEX initiative.

 Michael Dell, chairman and chief executive officer at Dell says, “By spinning off VMware, we expect to drive additional growth opportunities for us as well as VMware, and unlock significant value for stakeholders. Both companies will remain important partners, providing Dell Technologies with a differentiated advantage in how we bring solutions to customers. At the same time, Dell Technologies will continue to modernize its core infrastructure and PC businesses and embrace new opportunities through an open ecosystem to grow in hybrid and private cloud, edge and telecom.”

Upon completion of the spin-off, Michael Dell will remain chairman and chief executive officer of Dell Technologies, as well as chairman of the VMware board. Zane Rowe will remain interim CEO of VMware, and the VMware board of directors will remain unchanged. This will further strengthen the company’s leadership position in growing technology infrastructure and client markets