Dell to Spin-Off 81% Equity Ownership of VMware

The VMware, Inc.‘s Special Committee of independent directors and Dell Technologies have agreed to terms in which VMware will be spun-off from Dell.

The terms include significant simplification to the corporate ownership structure and an $11.5 billion to $12.0 billion special cash dividend recommended by the independent Special Committee and declared by the VMware board to all its stockholders immediately prior to the spin-off and subject to the satisfaction of all closing conditions. Dell Technologies stockholders will receive a pro-rata distribution of VMware shares held by Dell, and Michael Dell and Silver Lake Partners will own direct interests in VMware. The two companies have also finalized a commercial agreement that preserves and enhances their strategic partnership to deliver joint customer value.

VMware’s vision is to create an ubiquitous software and SaaS platform across all clouds and hardware infrastructure that helps accelerate customers’ digital transformation. A spin-off from Dell provides VMware increased freedom to execute its strategy, a simplified capital structure and governance model and additional strategic, operational and financial flexibility, while maintaining the strength of the 2 companies’ strategic partnership.

“We will have an enhanced ability to extend our ecosystem across all cloud vendors and on-premises infrastructure vendors and a capital structure that will support growth opportunities,” said Zane Rowe, CFO and interim CEO, VMware. “Our strategic partnership with Dell Technologies remains a differentiator for us, and, as we execute on our multi-cloud strategy, we continue to provide customers our solutions and services on any public cloud and any infrastructure.”

In connection with Dell’ Schedule 13D amendment filed on July 15, 2020, the VMware board formed a Special Committee of independent directors that retained legal and financial advisors to review and evaluate any potential proposal from Dell concerning business opportunities outlined in the Dell filing. The Special Committee evaluated and recommended approval of the transaction and special cash dividend by VMware’s board of directors.

“The VMware Special Committee is confident that the spin-off agreement will benefit all stockholders by establishing a simplified capital structure, positioning VMware well to execute on its strategy,” said Paul Sagan, lead independent VMware board member, special committee member and chair of the Compensation and Corporate Governance Committee.

“By spinning off VMware, we expect to drive additional growth opportunities for Dell Technologies as well as VMware, and unlock significant value for stakeholders,” said Michael Dell, COB, VMware. “Both companies will remain important partners, with a differentiated advantage in how we bring solutions to customers.”

Through its commercial agreement, the 2 companies will continue to collaborate and co-engineer solutions that provide strategic value to customers, with Dell providing go-to-market scale for VMware’s product portfolio.

The spin-off will provide VMware increased strategic, operational and financial flexibility and agility to drive its growth strategy. This includes simplifying capital allocation decisions and eliminating the current dual class stock structure. In addition, VMware remains committed to an investment grade rating and profile.
The estimated value of the $11.5 billion to $12.0 billion special cash dividend that VMware will provide to all stockholders ranges from $27.43 per share to $28.62 per share, based on outstanding shares as of March 16, 2021.

The transaction is expected to close during 4CQ21, subject to certain conditions.

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