(Reuters) – Dell Inc (DVMT.N) said on Monday it will buy out the holders of shares that track the performance of VMWare Inc (VMW.N) using a mix of cash and equity in Dell.
The move marks the culmination of a strategic review that Dell has been conducting for several months as it has sought to consolidate its complicated ownership structure without overburdening its balance sheet, which bears around $50 billion in debt. Dell said it will propose to exchange each share of VMware tracking stock for 1.3665 shares of Dell Technologies Class C common stock, or at the holder’s election, $109 in cash, subject to the total amount of cash consideration not above $9 billion.
The transaction represents a premium of 28.9 percent to Dell’s closing price on Friday
Shares of Dell were up 10.7 percent at $93.6 in premarket trading, while VMWare shares were up 12.3 percent at $165.
The cash component of the offer will be financed by a one-time $11 billion special dividend that VMWare will pay out pro-rata to its shareholders, VMWare said.
After the deal, VMware shareholders would own between 20.8 percent to 31 percent of Dell depending on how many investors opt for cash, Dell said.