VMware Strikes $2.7B in Deals for Pivotal, Carbon Black; Pat Gelsinger Quoted

Pat Gelsinger

VMware (NYSE: VMW) has agreed to acquire Pivotal Software (NYSE: PVTL) for approximately $800M in cash and cybersecurity firm Carbon Black (Nasdaq: CBLK) for about $1.9B. VMware said Thursday that it expects both transactions to be finalized in the second half of its fiscal year 2020 ending Jan. 31, subject to customary closing conditions.

VMware will combine its information technology infrastructure and expertise with Pivotal’s assets and developer experience to provide clients a comprehensive portfolio of tools, products and services needed to build, operate and oversee modern applications on Kubernetes infrastructure.

“We are excited to combine Pivotal’s development platform, tools and services with VMware’s infrastructure capabilities to deliver a comprehensive Kubernetes portfolio to build, run and manage modern applications,” said VMware CEO Pat Gelsinger. “Importantly, adding Pivotal to our platform, accelerates our broader Any Cloud, Any App, Any Device vision and reinforces our leadership position in modern multicloud IT infrastructure.”

Pivotal and VMware are both subsidiaries of Dell Technologies (NYSE: DELL).

Under the deal’s terms, VMware will purchase Pivotal for $11.71 in blended price per share. Holders of Pivotal’s Class A common stock will get $15 in cash for each share held and Dell will receive about 7.2M shares of VMware Class B common stock, resulting in $0.8B in net cash payout for VMware. Based on current outstanding shares, the impact of equity issued to Dell would raise its ownership stake in VMware to 81.09 percent.

J.P. Morgan Securities LLC and Wilson Sonsini Goodrich & Rosati respectively served as financial and legal advisers to VMware in the deal. Davis Polk & Wardwell LLP acted as Pivotal’s legal counsel. Lazard, Morgan Stanley, Latham & Watkins LLP and Gibson, Dunn & Crutcher LLP advised the special committees of VMware’s and Pivotal’s boards of directors on the transaction’s financial and legal aspects.

VMware agreed to buy Carbon Black for $26 in cash per share and expects to fund the transaction using existing cash and short-term borrowing capacity. Carbon Black provides a cloud-native security platform designed to offer endpoint protection to workloads and clients against cyber attacks by leveraging big data, behavioral analytics and artificial intelligence. It has over 5.6K clients and 500 partners worldwide.

“By bringing Carbon Black into the VMware family, we are now taking a huge step forward in security and delivering an enterprise-grade platform to administer and protect workloads, applications and networks,” Gelsinger said.

VMware will integrate Carbon Black’s platforms with its Workspace ONE, AppDefense, NSX, SecureState and other offerings to build security cloud platform for any app. J.P. Morgan Securities and Morrison & Foerster LLP acted as financial and legal advisers to VMware.  Morgan Stanley was Carbon Black’s financial adviser, while Goodwin Procter LLP served as the company’s legal counsel.

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