Dell sets date for VMware spin-off

The date is now officially set for November 1 for Dell Technologies to complete its spin-off of VMware following a five-year deep partnership between the infrastructure giant and virtualization superstar, which will make VMware an independent entity for the first time since 2004.

“This absolutely creates additional growth opportunities for both Dell Technologies and for VMware and also unlocks a lot of value for stakeholders,” said Dell founder and CEO Michael Dell in a recent interview with CRN.

Dell Technologies’ board of directors Tuesday approved the distribution of a special stock dividend to Dell stockholders of all its shares of Class A and Class B common stock of VMware, one of the final hurdles that needed approval before Dell could spin off its 81 percent stake of VMware to current Dell shareholders.

The largest VMware shareholder will be Michael Dell himself, who will own approximately 41 percent of VMware following the transaction. 

Share distribution will be made to all Dell shareholders of record on October 29, 2021. Dell shareholders will receive approximately 0.44 shares of VMware for each share of Dell that they hold, based on shares outstanding Tuesday. No vote or action is required by Dell shareholders to receive the special stock dividend of shares of VMware common stock.

“It does simplify our ownership structure and capital structures that unlocks shareholder value and drives down our debt. We’ve been paying down debt aggressively, and this will accelerate all of that,” said Michael Dell.

“From a customer and partner perspective, the headline is: Don’t expect any big changes. It’s great news for all of our stakeholders,” Dell went on to say. “I’ve explained this to certainly hundreds of customers one on one and everybody’s like, ‘Great. We get it.’”

As part of the deal, VMware will pay a special cash dividend of between US$11.5 billion and US$12 billion to the company’s shareholders, which will include around US$9.5 billion for Dell Technologies.

“The companies will continue to partner in a super strong way,” said Michael Dell. “Look, I’ll continue to be the chairman of both companies and the largest shareholder of both companies. Dell and VMware are going to partner super closely together.”

VMware CEO Raghu Raghuram recently told CRN that his company is looking to become the “Switzerland” of multi-cloud in the IT industry.

“If you think about multi-cloud, what we really are saying is that we want to be the Switzerland of the industry. So if you want to be the Switzerland of the industry, then you want to be a stand-alone independent company, and that’s where we are headed,” said Raghuram.

“It will allow partners that previously were competitors of Dell to now look at VMware with new life and say, ’Hey, we can do strategic things with VMware.’ But at the same time, we have a fantastic relationship with Dell, who we do a tremendous amount of business with. We have certified that into a commercial framework agreement and a technology agreement that allows for continued deepening technology and business collaboration with Dell.”

Raghuram said the spin-off will be a “best-of-both-worlds” situation.

“From a capital structure point of view, the capital structure will obviously be simpler and will allow us to have more flexibility and growth,” Raghuram said.

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