Enterprise, Mergers and Acquisitions

Dell Faces New EMC, VMware Buyout Pressures

So much for a relaxing Thanksgiving. Michael Dell's buyout of EMC and VMware apparently faces new shareholder questions, along with concerns about the Virtustream startup.

One report suggests that shareholders want Dell and Silver Lake to improve buyout terms for the proposed EMC and VMware acquisitions.  A separate report suggests that EMC is rethinking its plans for Virtustream, a hybrid cloud provider that the company acquired for $1.2 billion in May 2015.

Calling for Changes

According to Re/code, the three demands by some institutional shareholders are designed to address the 30 percent drop in VMware shares and 9 percent drop in EMC shares since the Oct. 12 buyout announcement. The demands involve VMware share buybacks, certain shareholder rights and a new approach to Virtustream's ownership.

Meanwhile, Reuters reported that EMC plans to retain a majority stake in Virtustream, abandoning earlier plans to place that hybrid cloud business in a joint venture with VMware. EMC and VMware declined comment to both Re/code and Reuters on the respective reports.

The Negotiators

Dell and Silver Lake, a private equity firm, announced plans to buy EMC and VMware for roughly $67 billion in October 2015.

While customers and partners have mostly welcomed the planned Dell-EMC-VMware business combination, some shareholders have raised questions about the deal -- demanding better terms or different financial scenarios for VMware, in particular.

It's unclear whether dissident shareholders can organize enough votes to force Dell, Silver Lake, EMC and VMware to alter the buyout terms.

Either way, Michael Dell's will and negotiating skills should not be underestimated. Don't forget: Michael Dell in 2013 took his company private in one of the most challenging, fiercely debated private equity buyouts on record.

Dell's EMC and VMware buyout is expected to be completed in mid-2016. That means there's plenty of time for shareholders to raise more questions. And plenty of time, of course, for Michael Dell and Silver Lake to address potential questions as well.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.