Dell to Take Over EMC in $67 Billion Deal, Creating End-to-End Technology Company

In what is being hailed as the biggest tech merger ever, Dell Inc. and EMC Corp. today formally announced they have signed a definitive agreement under which Dell, together with its owners, Michael S. Dell, founder, chairman and chief executive officer of Dell, MSD Partners and Silver Lake, will acquire EMC.  VMware in which EMC has a major stake will remain as a publicly-traded company. 

The total transaction is valued at $67 billion, according to Dell, and is subject to customary conditions, including receipt of required regulatory and EMC stockholder approvals. The deal is expected to close in the second or third quarter of Dell’s fiscal year which ends February 3, 2017 (within the months of May to October 2016). 

The deal combines two powerhouse technology franchises with leadership positions in servers, storage, virtualization and PCs, and it brings together strong capabilities in the fastest growing areas of the industry, including digital transformation, software-defined data center, hybrid cloud, converged infrastructure, mobile and security.

What it Means

Commenting on the acquisition and what it means for the future, leaders from both EMC and Dell discussed the acquisition in a conference call with media and industry analysts today.

The industry is going through a “tremendous transformation,” with the old style of IT being "pretty quickly disrupted" yet this rapid change is also presenting “incredibly rich”  opportunities, said Joe Tucci, chairman and chief executive officer of EMC, during the conference call. “There is more opportunity for IT solutions now than there has ever been in the history of man,” citing as an example sensor technology and the opportunity that it holds.

Now, with the “mother ship” being private, Tucci said, the new structure will provide EMC with “tremendous advantages,” allowing it to invest for the long term and attract and retain the best and brightest talent and build for the future, so it can help customers as they become “in effect digital themselves.”

Stronger Together

The combination of Dell and EMC will create an industry leader in the “extremely attractive, high growth” areas of the $2 trillion information technology market with complementary products and solution portfolios, sales teams, and R&D investment strategies, noted Dell in his remarks. He noted that the combination makes great sense because of the obvious ways the businesses complement each other and will enable each other to grow. “We are combining two of the world’s greatest technology franchises with leadership positions in storage, servers, virtualization, and PCs,” and bringing together leading capabilities in areas such as digital transformation, software defined data center, hybrid cloud, converged infrastructure, mobile, and security, Dell said.

The transaction will strengthen both companies in today’s increasingly competitive global marketplace. “We both have market leading portfolios in our respective segments - Dell in commercial PCs and servers, and EMC in storage, and VMware in virtualization,” said Dell. And, as the data market moves to a compute-centric converged model, Dell’s server franchise is a natural fit with EMC’s strengths, and there is also go-to-market synergy with Dell’s market strengths in the mid-market and EMC’s in the enterprise market.

“We have a growing commercial infrastructure franchise that is helping companies worldwide modernize their IT from the desktop to the data center and the cloud,” as well as worldwide supply chain capabilities with global reach, financial services which are a core part of the Dell sales motion, and a Dell PartnerDirect program for channel partners, said Dell. By joining Dell and EMC’s respective and complementary strengths, the combined company will be a leader in the most significant product segments in the market, said Dell.

The combined company will consist of strategically-aligned businesses and incubated high-growth assets, fostering innovation, enabling customer choice and attracting and retaining world-class talent. 

Structure and Leadership

The transaction is expected to be financed through a combination of new common equity from Michael Dell, MSD Partners, Silver Lake and Temasek, the issuance of tracking stock, as well as new debt financing and cash on hand. There are no financing conditions to the closing of the transaction. 

Michael Dell and related stockholders will own approximately 70% of the company’s common equity, excluding the tracking stock, similar to their pre-transaction ownership.

Following completion of the transaction, Michael Dell will lead the combined company as chairman and CEO. Tucci will continue as chairman and CEO of EMC until the transaction closes. Dell’s headquarters will remain in Round Rock, Texas, and the headquarters of the combined enterprise systems business will be located in Hopkinton, Mass.

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