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Dell’s Proposed Acquisition of EMC for $67 billion

Anne Shields

Dell's Proposal to Acquire EMC: the Biggest in Tech Space to Date

EMC finally gets a buyer

On October 12, 2015, according to a Wall Street Journal report, Dell (DELL) and its investment arm, Silver Lake Partners, announced the acquisition of EMC Corporation (EMC), including VMware (VMW), for $67 billion. The deal will be subject to regulatory approval and will create one of the largest privately held corporations in the world. EMC currently owns an 80% stake in VMware, which will continue to function as a publicly traded company.

Please read Why EMC, VMware, and Pivotal Form a Unique Business Model to know EMC’s business model in detail.

In August 2015, news surfaced that there would be a strong possibility of EMC being bought by its own subsidiary, VMware. EMC has been reeling under considerable pressure by Elliott Management, headed by Paul Singer, to consider itself breaking up.

The above graph shows the share price movement of EMC over the first week of October 2015. On October 8, EMC’s shares rose by 4.7%, on the back of the potential deal with Dell, to $27.18. The share price has continued its upward journey since then.

Dell’s cash and stock offer for EMC shareholders

Dell has offered EMC shareholders approximately $24.05 per share in cash. It has also offered $9.10 of tracking stock, which tracks the share price in VMware in relation to EMC’s share in VMware. The combined $33.15 per share is at an approximate 28% premium above EMC’s closing price on October 7, 2015.

If the Dell-EMC’s deal comes through, the joint company will have a wide range of offerings spanning cloud computing, mobility, and cybersecurity. In light of this deal, Cisco Systems (CSCO), IBM (IBM), and the Hewlett-Packard Company (HPQ) will now be forced to revise their strategies in order to gain momentum in the enterprise computing space.

You can consider investing in the SPDR S&P 500 (SPY) to gain exposure to the technology sector. The ETF invests about 18% of its holdings in the technology sector.

In subsequent parts of this series, we’ll discuss the various factors that led to the proposed Dell-EMC deal, which would be the biggest acquisition to date in technology space. Read the next part of the series for a discussion of Elliott Management’s role in the deal.

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