Dell and Silver Lake, a private equity firm, have agreed to purchase data-storage provider EMC for $67 billion, $40 billion of which will be financed. After going private two years ago, Dell began to move away from personal computers toward enterprise services.
Under the terms of the agreement, EMC shareholders will receive $24.05 per share in cash in addition to $0.111 shares of a tracking stock tied to EMC’s 80% stake at VMware. Based on the value for each share of tracking stock of $81.78, the intraday volume-weighted average price for VMware on Wednesday, October 7, 2015, EMC shareholders would receive a total combined consideration of $33.15 per EMC share.
Dell paid down billions of dollars in debt that resulted from leveraged buyout. The pay down gave Dell and Silver Lake the flexibility required for the EMC purchase. The EMC purchase also enables Dell strategically to become a one-stop shop for business customers.
The purchase of EMC by Dell represents the largest tech deal to date with the next largest being the acquisition of SDL by JDS Uniphase for $41 billion, followed by Avago’s purchase of Broadcom in May 2015 worth $36.5 billion.
The purchase is expected to close between May and October of 2016. The combined firm will focus on paying down debt during the 18 to 24 months after the closing. Michael Dell will lead the company as chairman and CEO after the closing. Joe Tucci, EMC's CEO, will remain as chairman and CEO of EMC until the closing.
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