Dell set to seal $63bn purchase of EMC

The largest-ever technology industry acquisition is set to close next week, following the announcement on Tuesday that Chinese regulators have approved Dell’s $63.4 billion (€56.8 billion) cash and stock purchase of computer storage company EMC.

However, news of the deal’s imminent completion failed to resolve lingering Wall Street scepticism about some aspects of the complex, highly-leveraged transaction that has persisted since it was announced in October.

EMC’s shares were still changing hands after the news at an 11 per cent discount to the value implied by Dell’s cash and stock offer, apparently reflecting doubts about the value of an unusual type of equity that is being issued to help finance it.

The so-called tracking stock is designed to reflect the performance of VMware, the datacentre technology company majority owned by EMC, though investors will have no direct ownership stake or say in how it is run.

Michael Dell, who has now sealed his position at the helm of one of the world's largest and most diversified IT groups, fended off questions about the persistent valuation discrepancy.

"The merger consideration has been clearly described, has not changed and won't change," he said in an interview with the Financial Times after the completion of the deal was announced.

He also brushed off questions about the complicated financial engineering that had been required to pull off the giant acquisition: “This is a better question for people who analyse markets all day long – we’re guys who build companies, and that’s what we’re focused on.”

However, Pat Gelsinger, VMware’s chief executive officer, acknowledged stock market wariness about the new tracking stock, particularly since a separate class of VMware shares is already listed.

“Obviously, having common and tracking [stocks] trading simultaneously, this is not typical,” he said. “I think there’s questions about how they’re going to trade in the marketplace.”

– (Copyright The Financial Times 2016)