The offer from Dell Technologies has to do with the company’s Class V tracking stock. This offer will allow holders of this stock, which tracks VMW, to trade it in for other stock or cash.
Holders of the Class V tracking stock are able to trade it in for 1.3665 shares of Dell Technologies Class C stock. There’s also the option for holders of this stock to cash in it for $109 per share. However, there is a limit of $9 billion total for the cash offer.
This change from Dell Technologies will have it completely eliminating the Class V tracking stock for VMware. Holders of the stock that don’t chose either of the options will automatically have their stock converted into shares of Dell Technologies Class C stock.
The offer will have the Class V stock holders owning between 20.8% and 31.0% of Dell Technologies. VMware will continue to remain an independent and publicly traded company following the deal. Dell Technologies will also continue to keep its 81% stake in the company.
To go along with this news, VMware is also announcing a special cash dividend. This dividend is for $11 billion, of which $9 billion will go to Dell Technologies due to its large stake in the company. DVMT says that it plans to use the money from this dividend to pay Class V shareholders that chose the cash option when trading in their stock.
VMW stock was up 9% and DVMT stock was up 7% as of noon Monday.
As of this writing, William White did not hold a position in any of the aforementioned securities.