Dell Confirms IPO Talks With Banks If VMware Stock Swap Fails

Dell Technologies has met with investment banks to explore a traditional IPO if its stock swap plan with VMware is rejected by DVMT VMware tracking stock shareholders, according to a Dell filing with the U.S. Securities and Exchange Commission on Wednesday.

Although Dell's board of directors still is pursuing its planned buyout of VMware tracking stock, "a potential contingency plan" is in place in case shareholders vote against the proposed plan, said the company in a SEC filing on Wednesday.

"Dell has met with certain investment banks to explore a potential initial public offering of its Class C Common Stock," Dell said in the filing. This means that the Round Rock, Texas-based infrastructure giant would become public by selling its own common stock to the public market.

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Dell's board said it continues to believe that the $21.7 billion VMware stock swap deal is still in the best interest of Dell's stockholders and is still proceeding to seek shareholder approval through a vote before the end of the year. A conventional route to an IPO would allow Dell to convert the DVMT shares into Dell common stock regardless of whether shareholders like it.

Since announcing the potential VMware stock swap plan to go public, investors such as Elliott Management have been criticizing the proposed deal. Last month, Dell postponed a series of roadshow meetings with investors to sell the takeover deal to investors.

Dell Technologies CFO Tom Sweet told analysts earlier this month that VMware would generate an additional $700 million in bookings in fiscal year 2019 as a result of its affiliation with Dell. "We continue to see strong cross opportunities as we leverage both the Dell Technologies and VMware sales forces," he said.

In the announcement of the proposed VMware tracking stock buyout, Dell said in a statement that VMware has "thrived as part of the Dell Technologies family and has seen tremendous traction and strategic relevance with all customers resulting in significant revenue growth and financial performance."

In a recent interview with CRN, Dell Technologies CEO Michael Dell said technical collaboration is at an all-time high with VMware.

"You'll continue to see the collaboration advance. VMware has done a great job in enabling and preparing for the multi-cloud world, and obviously it's a very important part of Dell Technologies," said Dell in an interview with CRN. "Partners and customers like and appreciate that we're bringing them a complete solution. … The more we can collaborate together across the Dell Technologies family, the better we're doing."