Dell announced this afternoon that it’s spinning out VMware, a move that has been suspected for some time. Dell, which acquired VMware as part of the massive $58 billion EMC acquisition (announced as $67 billion) in 2015, owns approximately 81% of the stock and the company is expected to receive between $9.3 and $9.7 billion when the deal closes later this year.
Even when it was part of EMC, VMware had a special status in that it operates as a separate entity with its own executive team, board of directors and the stock has been sold separately as well.
“Both companies will remain important partners, providing Dell Technologies with a differentiated advantage in how we bring solutions to customers. At the same time, Dell Technologies will continue to modernize its core infrastructure and PC businesses and embrace new opportunities through an open ecosystem to grow in hybrid and private cloud, edge and telecom,” Dell CEO Michael Dell said in a statement.]
While there is a lot of CEO speak in that statement, it appears to mean that the move is mostly administrative as the companies will continue to work closely together, even after the spin off is official. Dell will remain as chairman of both companies. What’s more, the company plans to use the cash proceeds from the deal to help pay down the massive debt it still has left over from the EMC deal.
The deal is expected to close at the end of this year, but it has to clear a number of regulatory hurdles first. That includes garnering a favorable ruling from the IRS that the deal qualifies for a tax-free spin-off, which is seems to be a considerable hurdle for a deal like this.
This is a breaking story. We will have more soon.