EMC share price climbs as Dell agrees $67bn takeover

on Oct 12, 2015
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US computer giant Dell has agreed to buy EMC Corporation (NYSE:EMC), the world’s largest provider of data storage systems, in a deal worth roughly $67 billion (£44 billion), the two companies announced today.

Dell, which was taken private back in 2013, has agreed to pay about $33.15 per EMC share, which is a 19 percent premium to EMC’s share price as of close on Friday. Dell’s offer includes $24.05 in cash and the remainder in tracking stock linked to a portion of EMC’s economic interest in the VMware business.
VMware, in which EMC owns about 80 percent, will remain a publicly traded company.
If completed, the deal would be the largest merger of tech companies of all time, combining “strong capabilities in the fastest growing areas of the industry, including digital transformation, software-defined data centre, hybrid cloud, converged infrastructure, mobile and security,” the companies said.
“Our new company will be exceptionally well-positioned for growth in the most strategic areas of next generation IT,” said Michael Dell, the founder, chairman and chief executive of Dell. “I am incredibly excited to partner with the EMC, VMware, Pivotal, VCE, RSA and Virtustream teams and am personally committed to the success of our new company.”
The combined company will provide nearly a third of the world’s data storage needs.
Joe Tucci, chairman and chief executive officer of EMC, said: “The waves of change we now see in our industry are unprecedented and, to navigate this change, we must create a new company for a new era.”
The deal is subject to approval from regulators and EMC shareholders. The transaction is expected to close between May and October 2016.
Despite the groundbreaking announcement, EMC’s share price saw a somewhat muted response from investors, with shares adding just 2.76 percent to $28.63 as of 14:41 BST. The company’s stock has climbed more than 20 percent over the past week, but is largely flat on an annual basis.
Dell has been drifting away from its historic roots in personal computers since the company went private about two years ago. Instead, the firm has sought to gain ground in more profitable businesses such as data storage and security.
Acquiring “EMC’s strength with large enterprises” will help Dell transition further away from being a consumer-facing company and towards a B2B model, analysts noted.
“Dell wants to become the old IBM Corp, a one-stop shop for corporate clients,” Erik Gordon from the University of Michigan’s Ross School of Business said as quoted by the BBC. “That model fell apart a couple of decades ago. Reviving it would be a stunning coup for Dell.”

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