Dell Technologies, the company which currently owns 80% share of VMware, might sell itself to VMware in a massive reverse-merger deal, and could emerge out as a public company.
According to the sources, the deal is not yet finalized. But if it happens, this reverse merger will supposedly be the biggest deal in tech industry ever. The plan of reverse-merging will help Dell to raise cash and reduce its substantial debt of around $50 billion, as per Bloomberg.
Dell had gone private in 2013, when it partnered with Silver Lake on a leveraged buyout. The partnership had helped Dell become a bigger hardware and software supplier for corporate data centers, avoiding the investor scrutiny that a public company has to face.
In 2015, Dell acquired EMC, the storage-technology provider, for $67 billion, but business model of Dell went under threat because enterprises started moving to cloud, like Microsoft Azure and Amazon Web Services.
Dell could follow a more traditional initial public offering, but the reverse merger may help the company avoid a new public offering. However, the reverse merger is not the only option for Dell. It might also buy the remaining 20% stake of VMware.
When the word about reverse merger deal spread, VMware’s stock fell sharply by 8.5%.
“Dell is also considering a public share sale for its Pivotal Software Inc. cloud-computing venture. Dell met with bankers last year to discuss that possibility and was told the company could fetch a valuation of $5 billion to $7 billion” said one of the people to Bloomberg, who asked not to be identified.