Dell Explores Spinoff. “..examining options including a spinoff for its roughly $50 billion stake in VMware Inc” – By Todd Horwitz Chief Strategist BubbaTrading.com

 

Dell Explores Spinoff

Dell Technologies Inc. is examining options including a spinoff for its roughly $50 billion stake in VMware Inc. as the PC maker seeks to boost the value of its shares. Dell recently kicked off a process to explore the possibility of unloading the stake or taking other steps that could include buying the rest of the cloud-software giant, according to people familiar with the matter. The companies are working with outside advisers, these people said. The review is at an early stage and no decision is imminent and it is possible Dell will choose to do nothing.

Dell has recently organized working groups to explore various possibilities for the VMware stake. The primary option is a spinoff to Dell shareholders of the stake, some of the people said. Dell is assessing various implications of such a move, from corporate governance to capital structure and how the companies would work together following a separation, these people said.

Any such move is unlikely before next year. Dell can’t spin off its VMware stake tax-free until September 2021, or roughly five years after the PC maker combined with EMC Corp., because of a rule requiring both companies involved in a spinoff to have operated continuously for five years to qualify for such treatment.

Dell, founded by Michael Dell in 1984, went private in a 2013 leveraged buyout by Mr. Dell and private-equity firm Silver Lake. They undertook a complex financial move that returned it to the public markets five years later. Dell shares closed at $48.29 Monday, compared with $45.43 on the first day of trading in late 2018. Dell finance chief Tom Sweet said in a June 15 blog post that the company’s priorities include optimizing its capital structure.

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Todd “Bubba” Horwitz
BubbaTrading.com

Financial Markets and Political Commentary
 

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Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.