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July 2, 2018
martinwolf  Transaction Analysis
Dell Returns to Public Market in $21.7B Buyout

Financial Information*
  • Transaction Value                                        $21.7B
  • EV/LTM Revenue                                         N/A
  • EV/LTM EBITDA                                           N/A
Transaction Facts
  • After five years off the stock market, Dell Technologies announced toda y that it has reached an agreement with its Special Committee of independent directors to exchange tracking stock for a new class of common shares. 
  • Class V stockholders can choose $109 in cash for each share they hold, or 1.3665 shares of Class C common stock.  The Class C shares will be listed on the New York Stock Exchange.
  • The offer of $109 in cash consideration per share represents a 29 percent premium to the Class V share closing price before the announcement.  
  • Michael Dell, who owns 72 percent of the company's common shares, will maintain his position as chairman and CEO, while Silver Lake Partners will keep its 24 percent stake.
  • Dell subsidiary VMware will maintain its independence as a separate publicly traded company while Dell will continue to own 82% of VMware common stock. As a result of this deal,  VMware will issue an $11B dividend, with $9B going to Dell. 
Coming Back After Five Years in the Private 
  • Savvy Owners: While the deal will simplify the stock structure of Dell and VMware, Michael Dell and Silver Lake will still retain substantial control of the company and also have greater voting rights due to the class of stock they own. 
  • New DirectionDell owners have not only been savvy about their own stake in the company, but have also been quick to act regarding the company's long-term direction. Through its $24B leveraged buyout (the biggest technology LBO of all time) in 2013, the company had arguably survived the post-PC era with the best possible option. Prior to going private, the company's stock price had fallen 31 percent mostly due to the cloud and mobile revolution eating away into the company's personal computer sales. Going private via the buyout had enabled the company to focus on new strategic investments and the formation a new Dell identity. 
  • Two Birds, One Stone: The return to the public market five years later is largely due to Dell's $67B acquisition of EMC two years ago, and EMC's 80 percent controlling stake in its software unit, VMWare. To offload part of its massive debt burden from the big-ticket purchase, Dell paid the remaining EMC shareholders partly in cash and partly with a new tracking stock, under the symbol "DVMT," representing the controlling stake. Now, as Dell plans to buy out owners of the tracking stock with cash and newly issued Class C shares (stock in Dell itself), Dell will once again become a public company -- just not the typical public company that sells new shares or raises capital.
  • Planned Return: Dell is experiencing a period of strong growth recently, according to its most recent press release. In its most recent quarter, the company generated $21.4B in revenue, a 19 percent increase year-over-year. In the last twelve months, the company generated $82.4B in revenue with a net loss of $2.3B and cash flow from operations of $7.7B. Additionally, since the EMC merger, Dell has paid down $13B of gross debt. 
For more information about this transaction,  click here to read the press release.

*Financial information from the press release.

martinwolf was not the advisor in this transaction.

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Headquartered in Scottsdale, Arizona with offices in the San Francisco Bay Area and New York, martinwolf is a leading M&A Advisory focused on middle market companies in the IT Services, IT Supply Chain, IT-Enabled Business Process Outsourcing and Software as a Service (SaaS) space. Since 1997, our team has completed more than 155 transactions in over 20 countries and sold seven divisions of Fortune 500 companies. 

 

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