Insight Bite: Dell ponders return to market with VMware reverse merger

Dell Technologies has confirmed it is considering a reverse merger with VMware, in a controversial megadeal that would see Dell return to the public markets.

Dell, which already controls a majority share of VMware, did not elaborate on how this deal would potentially be structured, emphasising that “nothing has been decided and alternatives are just being considered at this stage”.

Dell went private in 2013, in move made in part to refocus on delivering hardware and software for corporate data centres. In 2016, Dell acquired ECM in a $67 billion acquisition, and with that VMware. The virtualisation expert is a crown jewel in Dell’s portfolio.

The market’s immediate response to the news was to send VMware’s shares plunging, down by 10% on the day – so if Dell made the announcement to dip its toe in the water, the answer was clear. But Dell has made no secret of the fact that it wants to go public again. The world’s biggest private tech company has kept busy these past few years, reorganising and cutting costs, as well as integrating VMware.

The deal that brought VMware onboard did however saddle Dell with significant debts, and it is thought the repayment of these $46 billion loans is a motivation for this potential return to the stockmarket. Dell has a more plainly optimistic view on the deal, stating in its announcement:

“We do this from a position of strength, with a desire to grow Dell Technologies and its businesses even faster and thrive in the very dynamic IT marketplace.”

Whatever the reason, we expect to see a move sooner rather than later. Because one thing is certain: Dell’s PE backers Silver Lake put a lot on the line when it took Dell off the public market, and sooner or later it is going to need a payday.

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