The valuable 81 percent ownership stake in VMware held by Dell Technologies is to be spun off, generating a $12 billion shareholder dividend
Dell Technologies has announced it is to spin-off its valuable 81 percent ownership stake in virtualisation giant VMware.
Dell announced on Wednesday that it will spin-off its 81 percent equity ownership of VMware, to form two standalone public companies.
This is result in VMware distributing a special cash dividend of $11.5bn to $12bn to all VMware shareholders, including Dell.
VMware spin off
Dell said that it expects the spin-off to close during the fourth quarter of calendar 2021, subject to some conditions.
“Dell Technologies and VMware will enter into a commercial agreement that will preserve the companies’ unique and differentiated approaches to the co-development of critical solutions and alignment on sales and marketing activities,” the firm said. “VMware will continue to use Dell Financial Services to help its customers finance their digital transformations.”
“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, chairman and CEO at Dell.
“Both companies will remain important partners, providing Dell Technologies with a differentiated advantage in how we bring solutions to customers,” said Dell. “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.”
Michael Dell, upon completion of the spin-off, will remain chairman and CEO of Dell, as well as chairman of the VMware board.
Zane Rowe will remain interim CEO of VMware, and the VMware board of directors will remain unchanged.
Dell had acquired its ownership stake in VMware when it acquired storage giant EMC for $67 billion back in 2015.
The reason why Dell is pursing the spin-off is that it will simplify capital structures for both companies, and the transaction will provide the two firms additional strategic and financial flexibility.
VMware is certainly an important revenue maker for Dell, and the spin-off is a bold move, and will please shareholders and Wall Street investors.
The separation will also allow both entities to focus on their own hardware, software segments.