Michael Dell Working Towards a Reverse-Merger of VMware

The tech world is zeroed in on Dell, which is expected to lay out its strategic options regarding a reverse-merger with VMware, a maker of virtualization software, by the end of this month. This deal would take Dell Technologies back into the public market.

With this deal, Dell stands to gain an advantage — A combination of equity-exchanges and stock-swaps would give Dell access to VMware’s cash flow, and a joint Dell-VMware would acquire the Dell tracking stock (ticker: DVMT) at a premium.

As it stands, Dell already owns roughly 80 percent of VMware. Despite releasing statements last month, neither company has explicitly commented on details of this potential deal. However, a source close to the matter revealed the reverse-merger is more likely than an IPO for Dell.

This move begs the question, “why now?”

The timing likely isn’t accidental. Michael Dell knows his server business is on the rise and the PC business is stable. Dell also acquired EMC for $67 billion in the most significant pure technology deal ever in 2015 and has since managed to reduce total consolidated debt by $10 billion.

All of this may allow Michael Dell to get a fair valuation of the business at an unusually high price now, letting him maintain more control over a combined Dell-VMware.

So far, Dell has not commented.



Sources: CNBC, VMware