> Under the terms of the transaction, Pivotal's Class A common stockholders will receive $15.00 per share cash for each share held, and Pivotal's Class B common stockholder, Dell Technologies, will receive approximately 7.2 million shares of VMware Class B common stock, at an exchange ratio of 0.0550 shares of VMware Class B common stock for each share of Pivotal Class B common stock. This transaction, in aggregate, results in an expected net cash payout for VMware of $0.8 billion. The impact of equity issued to Dell Technologies would increase its ownership stake in VMware by approximately 0.34 percentage points to 81.09% based on the shares currently outstanding. VMware currently holds 15 percent of fully-diluted outstanding shares of Pivotal. The transaction is expected to be funded through cash on the balance sheet, accessing short-term borrowing capacity, and approximately 7.2 million shares of VMware Class B common stock to Dell.
personally i enjoy it because of insightful comments
"Pivotal trades at a loss but revenue is growing. Having said that, in its report to investors last month, after the release of its first quarter results for FY 2020, the company issued revenue projections that were lower than expected. Shares immediately suffered a more than 40 per cent fall and have not yet recovered. They're currently cruising along at about $10 apiece, five bucks below its 2018 IPO opening price of $15."
Interesting that the IPO price was also $15.
I would say the transaction is mostly boring accounting, not anything weird. Who knows if Pivotal should operate as part of VMWare instead of independently, but once you decide to do that, you have to consolidate the ownership somehow.
An aside, the difference in the shares is so that Dell could keep control of the company while selling some of it on the stock market. I wonder if there is a good analysis of how companies with closely held control do over time.
Context: Dell has large stakes in both Pivotal and VMware
VMware buys Pivotal. Pivotal's regular shareholders get paid in cash per share ($15). Dell, which owns a separate class of shares, gets paid in VMware shares rather than cash. This is likely because Dell already has a large cash balance and they don't need any more cash.
Potentially.
"Intel paid Dell in the form of rebates as part of an agreement to ensure that Dell would not use computer chips made by Advanced Micro Devices in its personal computers and computer servers, according to the civil charges."[1]
Dell paid the SEC $100 million in penalties, Intel $1.45 billion.
Famously, Apple has always refused.