In a rare reverse merger, Dell could sell itself to the smaller VMware in a bid to consolidate assets and take Dell public…again.
We’re less than a month into 2018, and there’s already a potential new contender for the largest tech deal ever. According to CNBC, Dell is considering a move to sell itself to VMware in a massive reverse merger that could exceed the record-setting $67 billion Dell paid to buy EMC in 2015.
Dell did not immediately respond to a request for comment; VMware declined to comment.
Why would Dell, which already owns 80 percent of VMware, sell itself back to the smaller company? There are a few compelling reasons.
The reverse merger would allow Dell to once again become a public company without having to undergo a fresh initial public offering (IPO). The company went private in 2013 in a $24.4 billion deal that gave ownership control to founder Michael Dell and private equity firm Silver Lake Partners. Dell is reportedly carrying around $50 million in debt, but going public through VMware would allow Dell and Silver Lake to sell back some of their shares publicly, both to offset the debt and to cash in themselves.
The other angle here is all about the cloud. VMware remains profitable and with growing revenue, but the company’s virtualized platform is losing business to public cloud infrastructure players such as Amazon Web Services and Microsoft Azure.
The company relented and now allows customers to run VMware software and virtual machines (VMs) on AWS. Dell also sells a lot more than laptops nowadays, including various cloud, data center, and Internet of Things (IoT) solutions and services. The merger would theoretically allow the companies to realign their combined infrastructure and software-as-a-service (SaaS) portfolios.
CNBC reports that Dell’s board of directors will meet later this month to consider several options, including the reverse merger.