Dell to buy storage firm EMC in US$67b deal
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COMPUTER maker Dell Inc said yesterday it had agreed to buy data storage company EMC Corp in a US$67 billion record technology deal that will unite two mature companies and create an enterprise tech powerhouse.
The acquisition will help privately held Dell diversify away from a stagnant personal-computer market and give it greater scale in the faster-growing and more lucrative market for managing and storing data for enterprises.
“Dell wants to become the old IBM Corp, a one-stop shop for corporate clients. That model fell apart a couple of decades ago. Reviving it would be a stunning coup for Dell,” said Erik Gordon who teaches at the University of Michigan’s Ross School of Business.
The deal valued EMC at US$33.15 a share as of the end of trading on Friday. Dell will pay US$24.05 per share in cash and will also give EMC shareholders a special stock that tracks the share price in virtual software provider VMWare Inc. EMC shares surged 2.7 percent to US$28.62 in premarket trading.
“The combination of Dell and EMC creates an enterprise solutions powerhouse,” said Michael Dell, who will lead the combined company as chairman and chief executive.
EMC’s board has approved the merger and will recommend that shareholders do so as well. The merger agreement includes a 60-day ‘go-shop’ provision that allows EMC to solicit bids from other parties and pay a discounted breakup fee to Dell if a deal is made with another company, as Reuters first reported on Sunday.
While IBM, Cisco Systems Inc, Oracle Corp and Hewlett-Packard Co could potentially be suitors for EMC, the chances of them challenging Dell with a rival offer are slim, people familiar with the matter said.
“We view this as a good outcome for EMC shareholders after a nightmarish few years of slowing growth and an antiquated federated strategy,” said FBR Capital Markets analyst Daniel Ives.
The deal will be financed through a combination of new equity from Dell’s owners — founder and Chief Executive Michael Dell, its investment firm MSD Partners, private equity firm Silver Lake and Singapore state-owned investor Temasek Holdings — as well as the issuance of the tracking stock, new debt and cash on hand.
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