Dell poised to reveal $53bn acquisition of EMC

Dell poised to reveal $53bn acquisition of EMCDell is poised to announce the biggest deal in tech history as early as Monday, after the privately run PC maker agreed to acquire data storage maker EMC for more than $53bn, according to people familiar with the matter.

EMC has agreed to an offer worth $33 a share that includes about $27 in cash for EMC shares with the rest in new securities tied to the value of VMware, the data centre software maker that EMC controls.

However, as part of the deal EMC will have up to 60 days to seek a better offer from other potential suitors, said people briefed about the transaction.

The “go-shop” provision, which was first reported by Reuters, is a preventive move to avoid a public confrontation with Elliott Management, the activist investor that has a significant stake in the company.

If completed, the deal would be the second large buyout by Michael Dell, one of the pioneers of the PC industry, in barely two years.

Mr Dell bought out his PC company two years ago for $25bn, in an effort to buy time for a restructuring of the company that he said would be hard to pull off under the short-termist pressures of the public markets.

Adding EMC’s storage business to Dell’s servers, IT services and PCs would round out its range of technology as it tries to position itself against established IT companies such as IBM and Hewlett-Packard.

Dell is in discussions with an array of banks to line up $40bn in financing to buy EMC, people familiar with the matter said.

An offer valued at roughly $33 a share would amount to a premium of 27 per cent over EMC’s stock price before news of the planned buyout leaked last week. It would also bring a profit of about 20 per cent for Elliott, which had pressed EMC to break itself up, increasing the chances the activist group would back the deal.

However, some executives at EMC fear Elliott could be unsatisfied with the offer made by Dell and Silver Lake, the private equity group that took the PC maker private with Michael Dell in 2013.

Joseph Tucci, chief executive of EMC, requested the insertion of a “go-shop” clause so that the storage company can solicit other bids in an effort to find the best possible deal for its shareholders.

People familiar with the situation said nobody has approached EMC yet with an alternative offer, and added that the likelihood new suitors would emerge was slim.

Some of the potential buyers EMC’s advisers are likely to reach out to are Microsoft and Cisco, according to people close to the storage company. The company discussed a possible merger with HP last year, though it is now in the midst of a corporate break-up of its own, ruling it out as a possible buyer.

EMC’s determination to use the “go-shop” provision to show it has achieved the best deal it could for its shareholders echoes the controversy surrounding the buyout of Dell in 2013.

The PC maker also opened itself to alternative offers after some shareholders rebelled against the price being offered by Mr Dell. No alternative emerged, but Mr Dell eventually sweetened the buyout offer by adding more cash to the deal.

Source: Financial Times
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