Dell Hits the Bulls-Eye in a Historical Bid of $67 Bn Takeover of EMC

By CIOReview | Monday, October 12, 2015
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SAN FRANCISCO, CA: The longtime quest of Dell to transform itself from a personal computer vendor to a one-stop-shop capable of serving technological needs of most large companies, reaches an end with the biggest ever deal in the history of technology industry.  After the failed efforts of HP, in a whooping amount of $67 Bn, Dell finally acquires network storage giant EMC Corporation.

The deal will be funded through a combination of new common equity, and will be paying the equivalent of 33.15 dollar a share in a complicated transaction involving both cash and a special kind of stock linked to a portion of EMC’s interest in the VMware business. Further fueling up the transaction process, Dell and Silver Lake has lined up a big group of banks to arrange the gigantic loan package. Thankfully for Dell, the move will come before the Federal Reserve raising the interest rates, which could have added tens of millions of dollars extra in higher debt payments.

EMC and its subsidiary company VMware specializes in “virtualization” and assist companies in making data centers more efficient, but  in recent times they have encountered strong competition and pressure from cloud services like AWS and other companies who have shifted paths towards cloud storage. But the record acquisition will fuse Dell’s server businesses with EMC’s storage and virtualization assets, with a broader range of products to dare Cisco Systems, IBM and HP in the cloud computing, mobility and cyber security forte. VMware will however remain as a publicly traded company.

The stock market however astonished the world by giving a lukewarm response to EMC, which rose close to 1.4 percent to 28.25 dollar after earlier jumping more than 2.5 percent. The most highlighting part of the merger is that the deal tops all the previous tech takeover deals with a double value, pushing the earlier Avago acquisition by Broadcom at 37 Bn dollar to second position.

Yet another surprising element in the merger allows EMC to solicit bids from other parties, followed by paying a discounted breakup fee to Dell, if a similar deal sparks up with another company. While IBM, Cisco, Oracle or HP hold the ground to be a potential suitor for EMC, in larger perspective the picture looks blurred.