Dell Technologies Announces Planned VMware Spin-Off

• Dell Technologies to spin-off its 81% equity ownership of VMware, forming two standalone public companies

• Under terms of the planned spin-off, VMware will distribute a special cash dividend of $11.5 – $12 billion to all VMware shareholders, including Dell Technologies

• The companies will strengthen their mutually beneficial strategic relationship and continue to co-engineer solutions for customers through a commercial agreement

• Transaction drives additional growth opportunities for Dell Technologies and unlocks significant value for stakeholders

Dell Technologies announces the planned spin-off of its 81% equity ownership interest in VMware. The transaction will result in two standalone companies positioned for growth in the data era. The transaction is expected to close during the fourth quarter of calendar 2021, subject to certain conditions, including receipt of a favorable IRS private letter ruling and an opinion that the transaction will qualify as generally tax-free for Dell Technologies shareholders for U.S. federal income tax purposes.

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Dell Technologies and VMware will enter into a commercial agreement that will preserve the companies’ unique and differentiated approaches to the co-development of critical solutions and alignment on sales and marketing activities. VMware will continue to use Dell Financial Services to help its customers finance their digital transformations.

“By spinning off VMware, we expect to drive additional growth opportunities for Dell Technologies as well as VMware, and unlock significant value for stakeholders,” said Michael Dell, chairman and chief executive officer, Dell Technologies. “Both companies will remain important partners, providing Dell Technologies with a differentiated advantage in how we bring solutions to customers. At the same time, Dell Technologies will continue to modernize its core infrastructure and PC businesses and embrace new opportunities through an open ecosystem to grow in hybrid and private cloud, edge and telecom.”

Upon completion of the spin-off, Michael Dell will remain chairman and chief executive officer of Dell Technologies, as well as chairman of the VMware board. Zane Rowe will remain interim CEO of VMware, and the VMware board of directors will remain unchanged.

Creating Substantial Value 

After a comprehensive review of potential strategic options, both parties determined that this transaction will simplify capital structures and create additional long-term enterprise value. At the transaction closing, VMware will distribute a special cash dividend of $11.5 – $12 billion to all VMware shareholders, including Dell Technologies. Based on Dell Technologies’ current 80.6% ownership in VMware, Dell Technologies would receive approximately $9.3 – $9.7 billion and intends to use the net proceeds to pay down debt, positioning the company well for Investment Grade ratings.

At the transaction closing, Dell Technologies shareholders would receive approximately 0.44 shares of VMware for each share of Dell Technologies that they hold, based on shares outstanding today. The final ratio is subject to incremental dilution prior to the transaction close. VMware will shift from a multiclass to a single class share structure while Dell Technologies’ share structure remains the same.

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Benefits to Dell Technologies

With an even stronger capital structure, Dell Technologies is poised to further capitalize on the rebound in infrastructure and PC spend, new cloud operating models driving as-a-Service growth, compute moving to the edge, and customers’ longer-term digital transformation initiatives. With a strong commercial agreement in place, Dell Technologies will have the ability to continue to work closely with VMware to drive innovation and preserve go-to-market synergies while generating new growth opportunities through an open ecosystem. With technology at the center of the world’s recovery, Dell Technologies is focused on:

• Further strengthening the company’s leadership position in growing technology infrastructure and client markets
• Expanding into new growth areas of hybrid cloud, edge, 5G, telecom and data management
• Delivering a modern customer experience in the do-from-anywhere economy, including moving quickly toward cloud operating and consumption models under the APEX initiative

Transaction Details

The transaction is expected to close during the fourth quarter of calendar 2021, subject to certain conditions, including receipt of a favorable IRS private letter ruling and an opinion that the transaction will generally qualify as a tax-free spin-off to Dell Technologies shareholders for U.S. federal tax purposes. Immediately following, and automatically as a result of, the spin-off, each share of VMware class B common stock will automatically convert into one fully paid and non-assessable share of VMware class A common stock. All of the outstanding VMware class B common stock is held by Dell Technologies.

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