Dell Inc. agreed to buy EMC Corp. for about $67 billion in the largest technology acquisition ever, creating a corporate-computing giant that will use a wider product lineup to woo customers as demand slows and competition stiffens.
Dell plans to pay $24.05 a share in cash plus tracking stock in EMC’s prize holding, VMware Inc., valued at about $9 for each EMC share, the companies said in a statement on Monday. The price of $33.15 a share is 28 percent above EMC’s closing level on October 7, just before reports surfaced that a deal was in the works. While the agreement has a provision that lets EMC talk to other potential bidders, the company doesn’t expect any, a person familiar with the matter said. EMC rose 2.5 percent on Friday to close at $27.86 on the New York Stock Exchange.
Dell will be run by Michael Dell, the CEO of the company he founded. The deal is expected to close in May to October of next year.
The deal would combine EMC’s dominance in devices that store data with Dell’s No. 2 position in servers, the powerful machines that help companies handle big computing challenges. Dell, which was taken private for about $25 billion in 2013, can expand its product lineup to vie with perennial rivals including Hewlett-Packard Co. and upstarts, such as Nutanix Inc.
Tucci succession
For EMC, the agreement addresses pressure from activist investors who have been agitating for growth and resolves long-standing questions over succession for CEO Joe Tucci. He has agreed to stay at the company through the close of the deal and may stay beyond that, said the person, who didn’t want to be named because the details haven’t been disclosed. Michael Dell reached out to Tucci about a year ago, and the companies’ boards started working on the agreement in the spring, the person said.
EMC, which has been publicly traded since 1986, had been looking at strategic options for boosting its share price. Activist investor Elliott Management Corp. had pushed for EMC to sell itself or spin off software maker VMware, of which the storage company is the majority owner.
EMC is facing weaker demand for its older, pricey storage models. While the company has been focusing on newer products, such as flash, arrays that speed up data retrieval, where it’s growing more rapidly, that hasn’t been enough to lift sales growth.