Dell says it will explore IPO or merger with VMware | Latest News

(Reuters) - Dell Technologies Inc. said on Friday it is considering a public offering of ordinary shares or a combination with VMware Inc. (VMW.N), a public affiliate vendor of business software.

Dell, the largest private technology company in the world, is under pressure to boost profitability after its EMC Corp's debt acquisition acquisition for $ 67 billion in 2016 failed to meet its financial targets, hurting intensified price competition.

The combination with VMware will give VMWare $ 11.6 billion of money to help clean up $ 52.5 billion in its debt pocket. Last month's tax reform in the United States has caused this debt to be more expensive due to restrictions on the deduction of interest costs.

The combination would also be made by Dell a publicly listed company that offers a way for Silver Lake, a private investment firm, to start selling its 18 percent stake if it chooses. Silver Lake helped the bank's Dell CEO, Michael Dell, to take over a private $ 24.9 billion buyout in 2013.

The blocking device prevents Dell from buying a stake in VMware that is not yet owned by September. Any merger previously agreed should be structured as the acquisition of Dell by VMware: the so-called back-merger.

"Dell believes the opposite merger of its majority subsidiary, VMware, as the most profitable alternative for Dell and Silver Lake," analysts at Wells Fargo Securities LLC said in a research report.

The combination of Dell and VMware would place them under the same control and help them coordinate the strategy. Dell software and VMWare software offerings could potentially be sold in one set of products.

"As part of our ongoing multi-year strategic planning, Dell Technologies evaluates a number of potential business opportunities," said founder Michael Dell in the blog post. "We do this out of strength, with the desire to expand Dell's technology and businesses even faster and to develop on a very dynamic IT market."

Reuters announced on Thursday that Dell plans to announce a review of possible back-merger with VMware as well as other options, including the sale of IPO or assets. Resources for Reuters VMware has probably set up a special committee that would consider combining with Dell