Silver Lake-backed Dell to Acquire EMC in Largest Tech Takeover Ever
October 13, 2015
Silver Lake-backed Dell has agreed to purchase EMC (NYSE: EMC) in a $67 billion transaction, the largest tech takeover ever. As outlined in the deal, EMC shareholders will receive $24.05 per share in cash, as well as tracking stock linked to a portion of the company's economic interest in VMware (NYSE: VMW). Based on the estimated number of EMC shares outstanding at the close of the transaction, the company's shareholders are expected to receive roughly 0.111 shares of new tracking stock for each EMC unit, equating to a total combined per-share consideration of $33.15. The tracking stock value used in the deal is estimated using VMware's intraday volume-weighted average price on October 7 ($81.78).
As rumors of the deal began to surface last week, the ability to actually execute the transaction was in doubt given the financing challenges. To get the deal done, Dell will tack on somewhere around $45 billion in debt, which is even more astonishing since it had nearly $12 billion in outstanding debt after its LBO just a couple of years ago. Nonetheless, it has secured the necessary funding through a consortium that includes the majority of Wall Street giants. Dell expects the transaction to have a neutral to positive impact on its current corporate credit ratings—despite the size of the required debt package—and the company will look to rapidly de-lever upon closing; it will also redeem a significant amount of outstanding notes prior to or at the time of closing.
Michael S. Dell (founder, chairman and CEO of Dell), Silver Lake, MSD Partners (the Dell family office) and Singapore-based Temasek have kicked in equity for the deal. The merger, expected to close between May and October 2016, is said to include a 60-day go-shop period. However, with the size of the current deal, it would be fairly shocking if a higher bid came to the table.