Dell Inc. on Monday announced that it has signed an agreement under which it, along with partners Silver Lake and MSD Partners, will acquire EMC Corporation, while maintaining VMware as a publicly-traded company.
“The combination of Dell and EMC creates an enterprise solutions powerhouse bringing our customers industry-leading innovation across their entire technology environment,” said Michael Dell.
Bloomberg reports that the acquisition is largest ever and amounts to about $67 billion as founder Michael S. Dell seeks to leverage EMC’s dominance in storage devices amid intensifying competition. Dell plans to pay $24.05 a share in cash along with tracking stock in EMC’s prize holding, software maker VMware Inc., valued at about $9 for each EMC share.
What makes this deal eye-catching, according to Techcrunch, is that Dell, with a valuation of around $25 billion, is the smaller one of the two - approximately half the size of EMC.
Forbes calls this a “desperate move” which the computer maker has taken on as it looks for a way out of the collapse of the personal computer market. EMC, despite its healthy financials and ownership of VMware, is an infrastructure player in a market where infrastructure is decreasingly important.
Dell has had to undertake gigantic debt to make the purchase, adding about $50 billion to its debt load on top of the $11 billion it already is carrying, and faces annual interest repayments of $2.5 billion, which will force it to sell other divisions.
Silver Lake has already approached HP, Huawei, and Lenovo in a bid to strike a deal for the sale of its PC division, although it more difficult now because any buyer will know Dell is desperate, Forbes reported.
