Dell reportedly flirting with making a VMware initial public offering (IPO)
CNBC sources report that Dell Technologies is considering a reverse merger with VMware in which the latter company would purchase the former parent company. Dell originally agreed to purchase EMC for $67 billion in 2015, marking the biggest deal in tech history. The reverse merger could help Dell pay off $50 billion in debt leftover from the EMC merger, according to the CNBC report.
Dell’s board of directors plans to meet later this month to discuss options, including an initial public offering (IPO), according to sources familiar with the matter, Bloomberg reports. Another possible option would be to purchase the rest of VMware, which Dell owns 80% of as a result of the EMC acquisition.
VMware stood at the forefront of virtualization at the time of the acquisition. Since then, more companies have gravitated away from VMware’s business model and toward a cloud model. As a result, in 2016, the company introduced VMware Cloud on AWS, bringing VMware’s Software-Defined Data Center software to the AWS cloud.
A price tag attached to a potential reverse merger remains unknown. A Dell spokesperson said that the company, “does not comment on rumor or speculation.” VMware did not immediately return a request for comment.
Company owner Michael Dell took the business private in 2013 by partnering with private-equity firm Silver Lake in a leveraged buyout. Consequently, Dell grew into a major supplier of hardware and software for data centers. A reverse merger with VMware would make Dell a public company again. In the event of a reverse merger, VMware would issue shares to Michael Dell and Silver Lake, according to CNBC.
Reports that Dell is considering an IPO resulted in VMware’s shares increasing nearly 20% last Friday. The company’s revenue has helped Dell’s bottom line. VMware brought in $1.98 billion in revenue for the third quarter of 2017, an increase of 11% from the third quarter of 2016.
It should be noted that Dell is also considering a public share sale for its Pivotal Software business unit, which is valued between $5 billion to $7 billion. Dell reportedly met with bankers last year to discuss the possibility of an IPO for Pivotal.
