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