New York: In one of the mega acquisitions in the global IT space, PC maker Dell Inc will acquire EMC Corporation for about USD 67 billion to create the “world’s largest privately-controlled, integrated technology company”. Under the definitive agreement, Dell along with its owners — Founder & Chairman Michael S Dell MSD Partners and Silver Lake, the global leader in technology investing — will acquire EMC Corporation.
The EMC Board of Directors approved the merger deal and intends to recommend that stockholders of EMC approve the agreement. Based on valuation for each share of “tracking stock of USD 81.78, the intraday volume-weighted average price for VMware on Wednesday, October 7, 2015, EMC shareholders would receive a total combined consideration of USD 33.15 per EMC share and the total transaction would be valued at approximately USD 67 billion”, Dell Inc said in a statement.
Under the terms of the agreement, EMC shareholders will receive USD 24.05 per share in cash in addition to tracking stock linked to a portion of EMC’s economic interest in VMware, which is an arm of EMC Corporation.
Based on the estimated number of EMC shares outstanding at the close of the transaction, EMC shareholders are expected to receive approximately 0.111 shares of new tracking stock for each EMC share, it added. The combined entity will be “a leader in the extremely attractive high-growth areas of the USD 2 trillion information technology market with complementary product portfolios, sales teams and R&D investment strategies”, the statement added.
“The transaction combines two of the world’s greatest technology franchises with leadership positions in servers, storage, virtualisation and PCs…,” it added. Commenting on the acquisition, Michael Dell said: “Our new company will be exceptionally well-positioned for growth in the most strategic areas of next generation IT, including digital transformation, software-defined data center, converged infrastructure, hybrid cloud, mobile and security.”
EMC Chairman and CEO Joe Tucci said “the waves of change we now see in our industry are unprecedented and, to navigate this change, we must create a new company for a new era”. The combination of EMC and Dell will prove to be a winning combination for customers, employees, partners and shareholders, he added.
The deal combines EMC’s leadership in digital storage with Dell’s expertise in the servers market that businesses use for computing tasks. With EMC in tow, Dell would look at expanding its product lineup in high-end data storage equipment as it competes with the likes of Hewlett-Packard Co and others. Dell went private for about USD 25 billion in 2013.
EMC Corporation has over 5,000 employees as part of its centre of excellence and another 550 in sales and marketing. The company had operations in India in October 2000 and has since scaled up its presence with the government sector accounting for a significant part of its business. For FY 2012-13 EMC India revenue stood at Rs 1,847 crore as per DQ Top 20 and is ranked 49th in the top 100 IT companies in India. The US-based firm registered revenues of USD 24.4 billion in 2014. It employs about 60,000 people worldwide.
The company has so far invested USD 2 billion in India in the past five years mainly on expansion and marketing. The deal would combine EMC’s leadership in digital storage with Dell’s expertise in the servers market that businesses use for computing tasks
Dell Inc said the transaction is expected to be financed through a combination of new common equity from Michael Dell, MSD Partners, Silver Lake and Temasek, the issuance of tracking stock, as well as new debt financing and cash on hand.
There are no financing conditions to the closing of the transaction, it added. “(Michael) Dell and related stockholders will own approximately 70 per cent of the company’s common equity, excluding the tracking stock, similar to their pre-transaction ownership,” the statement said.
Following completion of the transaction, Dell will lead the combined company as Chairman and CEO, Tucci will continue as chairman and chief executive officer of EMC until the transaction closes. Dell said the transaction is expected to have a neutral to positive impact on its current corporate credit ratings.
“The combined company will focus on rapidly de-levering in the first 18 to 24 months following the closing of the transaction, and on achieving and maintaining investment grade debt ratings,” it added.
The transaction is subject to customary conditions, including receipt of required regulatory and EMC stockholder approvals. The transaction is expected to close in the second or third quarter of Dell’s fiscal year ending February 3, 2017 (within the months of May to October 2016), Dell said in its statement.