Dell Technologies (NYSE: DELL) has announced that it is considering spinning off about 81 percent of its equity ownership interest in VMware (NYSE: VMW) in an effort to create value and simplify capital structures.
Any potential spinoff would not transpire before September 2021 as Dell Technologies intends for the deal to be tax-free, the company said Wednesday.
“Regardless of the options we are exploring to create additional value, we are accelerating our strategy – which remains unchanged,” said Michael Dell, chairman and CEO of Dell Technologies. “We are focused on winning in the consolidating markets where we operate and innovating across the Dell Technologies portfolio to create integrated solutions that turn data into insights and action.”
In the event of a spinoff, Dell Technologies said it would formalize intellectual property agreements and other commercial arrangements similar to those in place, arrange payment of a special cash dividend on a pro rata basis by VMware to its shareholders and “negotiate terms consistent with an investment grade rating for both companies.”
Dell Technologies said its exploration of a spinoff is in an early stage and that it continues to assess several strategic options, including keeping its current ownership in VMware.
Dell Technologies acquired a majority stake in VMware in 2016 after Dell and EMC closed their $67B cash-and-stock merger.