Dell is considering a sale to VMware in what may be tech’s biggest deal ever
The deal would give Dell shareholders a way to profit from having taken Dell private in 2013 and help pay off some debt
By Alex Sherman
Dell Technologies could emerge as a public company through a reverse-merger with VMware , the US$60 billion cloud computing company it already controls, according to people familiar with the matter.
The reverse merger, whereby VMware would actually buy the larger Dell, would then allow Dell to be traded publicly without going through a formal listing. It would also likely be the biggest deal in tech industry history, giving investors who backed Dell’s move to go private in 2013 a way to monetize their deal, while helping Dell pay down some of its approximately US$50 billion debt.
While Dell may also pursue a more traditional initial public offering, said the people, a reverse merger would allow the company to avoid a new public offering. Dell hasn’t decided on a strategic option and is also considering several other paths forward, including other acquisitions or buying the remaining stake of VMware it doesn’t own, as has been previously reported . Dell is unlikely to sell the company outright or sell its stake in VMware, one of the people said.
VMware was seen as the crown jewel in 2015 when Dell acquired EMC for US$67 billion. That gave Dell 80 per cent of VMware, which was an early pioneer in a technology called virtualisation. That process gave companies a way to run the large computers in their data centres more efficiently by packing multiple “virtual” computers on a single piece of hardware.
While the technique is still widely used, VMware’s growth prospects have been tempered as companies have moved more of their infrastructure from their own data centres to large cloud providers like Amazon and Microsoft . In 2016, the company agreed to let customers run its software on arch-rival Amazon’s cloud service, an admission that the cloud model is taking precedence.