Dell Is Exploring Possibility Of Traditional IPO As Alternative To VMware Tracking Stock Deal: Report

Dell Technologies is exploring the possibility of a traditional initial public offering and has plans to interview several banks this week for underwriting roles, according to a report in The Wall Street Journal.

As a result, Dell postponed a roadshow to sell the takeover deal that was to begin this week, according to The Wall Street Journal report.

The traditional IPO route would be in lieu of going public through a proposed acquisition of Dell's VMware tracking stock, according to The Wall Street Journal.

The Journal said that interviewing the banks could be seen as a "tactic to put pressure on investors" to support the VMware tracking stock deal.

Dell said it is not commenting on The Wall Street Journal report.

Dell Technologies Chief Financial Officer Tom Sweet told Wall Street analysts earlier this month that the company was planning a series of roadshow meetings with investors both in one-on-one and group settings across the country to make a case for the planned buyout of the Dell VMware tracking stock.

Under the terms of the proposed buyout, shareholders of the DVMT tracking stock would exchange each share of DVMT tracking stock for 1.3665 shares of Dell Technologies Class C common stock or $109 per share with the aggregate, not exceeding $9 billion.

The proposed $21.7 billion tracking stock buyout would effectively mark the return to the public market by Dell Technologies – five years after Dell founder and CEO Michael Dell took the company private in one of the largest private equity buyouts ever.

As part of the deal, VMware's board of directors has voted to declare an $11 billion cash dividend to all VMware shareholders contingent on the completion of the deal.

After the deal is completed, VMware would maintain its independent status as a publicly traded company, with Dell continuing to own 81 percent of VMware common stock.

Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech, a Dell EMC Titanium partner, said he sees either the traditional IPO or the VMware tracking stock deal both benefitting partners.

"From a partner or a customer perspective, I don’t see either one of those options being more favorable than the other," he said. "The important thing is keeping the DNA of the tight integration between Dell and VMware which is benefitting customers and partners."

Venero said the tight alignment between Dell and VMware has proven itself to be a finely tuned engine that is driving better solutions for IT buyers and as a result driving sales growth of both companies' products and services in the channel.

"Either way it goes there is no doubt that Michael and his executive team are going to continue to drive their agenda around a fully integrated technology stack that is Dell EMC and VMware," said Venero.

Since Dell's blockbuster $67 billion acquisition of EMC and VMware in September 2016, Future Tech's Dell EMC and VMware sales are both up double digits, said Venero.

"The trend for Dell EMC VMware sales is upward and to the right where we all hoped it would be when Dell acquired EMC," said Venero. "We are confident that trend is going to continue."

Dell's CFO 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."

Furthermore, Dell said that after the transaction concludes, he looks forward to VMware's "continued independent status, strategy and capital allocation policy for organic investment, M&A and shareholders returns."