January 22, 2016

What does VMware’s plummeting tracking stock value mean for the Dell-EMC deal?

What is the future of the Dell-EMC merger?

Last October, technology giant Dell announced it would buy the multinational data storage company EMC in a monumental merger deal worth $67 billion. In the months preceding the deal, EMC stock was up to around $28.35 due to shareholder anticipation. Since this time, however, shares are down.

A major element of this mind-blowing deal, The Register's Chris Mellor wrote, centered around EMC shareholders receiving $24.05 cash, along with access to VMware tracking stock, which was then valued at $9.10 but has seen plummeted to a value of near zero. Before the deal, VMware's shares were valued at $82.09, but have since fallen by a 40 percent to $49.20.

Since this market change, EMC's gain is now valued at $47.2 billion. This means that Dell's investors must raise around $40 billion to effectively fund this Dell-EMC merger, John Shinal at USA Today explained. Industry experts claim that Dell could also forgo the tracking stock portion of the merger, leaving the deal valued at around $50 billion, yet this outcome is less than certain.

"If that debt-raising exercise fails, because investment groups and organisations can't see EMC shareholders accepting the tracking stock, and can't also see why they should finance Dell/Silverlake buying EMC for 30 per cent more than it's worth, then the whole deal could fall apart," Mellow reported.

Avoid agreeing to a deal that fails to meet your company's desired growth needs and desires. Contact us today to see how your company can benefit from insightful guidance from our skilled team of experts.