Dell Comes Public in Reverse Merger With VMware Tracking Stock

The stock that trades on the New York Stock Exchange as Dell Technologies Inc. (NYSE: DVMT) is a tracking stock the company issued last year at the time of its $60 billion acquisition of VMware. Early Monday morning, Dell Technologies revealed details of an offer to buy out its Class V common stock shareholders for cash and Class C common stock valued at $109 per share.

Dell holds an 81% economic interest and a 97% voting interest in VMware, and the Class V stock was created to “track” a portion of this interest.

According to the announcement, the implied value of $109 per share represents a premium of 29% to the price of the Class V stock at last Friday’s closing price of $84.58. Class V stockholders can choose to receive a combination of 1.3665 shares of Class C common stock for each share of Class V stock they own or $109 per Class V share in cash up to an aggregate amount of $9 billion.

After the deal closes, Class V stockholders will own almost 21% of Dell if the cash option is elected or 31% of Dell based on all-stock consideration. That translates to a pro forma equity value of $61.1 to $70.1 billion for Dell Technologies based on an implied value of $109 per Class V share.

The special Dell Technologies board of directors committee that recommended the purchase said:

Following this comprehensive evaluation, we determined that the transaction announced today is the best way to maximize value for all Class V stockholders. The implied value of $109 per Class V share provides Class V stockholders with a significant and immediate premium as well as the ability to participate in the future upside of Dell Technologies. Further, the option for stockholders to elect up to $9 billion in cash (nearly half of the implied transaction value) provides stockholders the ability to, in whole or in part, obtain certainty on the value received for their shares.

Once the transaction is completed, Dell Technologies plans to list its Class C shares on the New York Stock Exchange.

The Class V shares traded up about 13% in Monday’s premarket session, at $95.75 in a 52-week range of $59.93 to $92.40. The 12-month consensus price target is $104.71.

The company will hold a conference call Monday morning and has prepared a presentation providing more details on the reverse merger and the resulting company.