Will buy VMware Dell

VMware becomes independent

Dell Technologies separates from its subsidiary VMware. That was pouring money into Dell, which is preparing for a post-COVID boom in hardware sales. VMware develops software and is particularly known for its virtualization systems. The company is currently 80.6 percent owned by Dell. That should change if the US tax authorities play along and approve a tax-free spin-off.

Dell shareholders should then receive approximately 0.44 VMware shares per Dell share. Immediately beforehand, VMware is to pay out a special dividend of 11.5 to 12 billion US dollars. That would bring in $ 9.3 to $ 9.7 billion for Dell. This money is earmarked for debt repayments to improve Dell's credit rating, which in turn would make new loans cheaper.

Spin-off should give a boost

Dell and VMware remain linked through contracts. Dell announced this on Wednesday evening. Joint projects are still planned for development, sales and marketing. In addition, VMware aims to make financing through Dell Financial Service attractive to its customers. Dell CEO Michael Dell remains chairman of the VMware board of directors.

The CEO expects growth spurts for both companies from the split. Apparently institutional investors see it that way too. After the plans were announced, Dell shares rose 8.5 percent in after-hours trading. In VMware shares, there was a smaller increase of 1.5 percent.

prehistory

VMware was founded in 1998 and was acquired by EMC in 2004. EMC brought VMware on the stock exchange in 2007, but kept 85 percent of the shares. In 2016, Dell and EMC merged to become Dell Technologies. VMware has been part of Dell ever since. In 2013 Michael Dell bought back the company he founded in 1984 and took it off the stock exchange.

Dell returned to the stock exchange at the end of 2018 - and VMware played a central role in this: When Dell took over the cloud specialist VMware in 2016, VMware remained listed on the stock exchange with the help of the stock market vehicle Tracking Share. This reflected the development of VMware. In 2018, its shareholders received Dell shares plus a special dividend in exchange for their tracking shares. In this way, Dell was able to return to the stock exchange without an initial public offering (IPO).

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