EMC to pay up to $2.5 billion to Dell if it opts for rival bid

Tue Oct 13, 2015 5:29pm EDT
 
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By Devika Krishna Kumar

(Reuters) - EMC Corp EMC.N said it would pay Dell Inc [DI.UL] up to $2.5 billion in termination fees if the data-storage company accepts a "superior proposal".

The company will have to pay about $2 billion before the expiry of the 60-day 'go-shop' period, during which EMC can solicit other bids, and $2.5 billion after the expiry on Dec. 12.

EMC said Dell had secured financing of up to $49.5 billion from banks to fund the roughly $67 billion deal announced on Monday.

While IBM Corp (IBM.N: Quote), Cisco Systems Inc (CSCO.O: Quote), Oracle Corp (ORCL.N: Quote) and Hewlett-Packard Co (HPQ.N: Quote) could be potential suitors for EMC, the chances of them challenging Dell with a rival offer are slim, people familiar with the matter told Reuters on Monday.

Dell's offer is structured in a way that will also give EMC shareholders a special stock that tracks the share price in cloud-based virtualization software maker VMware Inc (VMW.N: Quote), which is majority-owned by EMC.

Upon closure of the deal, EMC shareholders will own about 53 percent of VMware, Dell and its investors will have a 28 percent stake and existing shareholders will hold the rest.

VMware will remain a publicly traded company.

Analysts have said that Dell's plan to create a VMware tracking stock will likely hit the virtualization software company's price as the size of the float increases.   Continued...

 
The EMC logo is seen at the entrance to the company's office in Santa Clara, California, in an undated photo provided by EMC.  REUTERS/EMC/Handout via Reuters