Dell-EMC deal threatened by possible $9 billion tax bill: Re/code

Tue Nov 10, 2015 6:05pm EST
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By Lehar Maan and Anya George Tharakan

(Reuters) - Dell Inc's $67 billion offer to buy data storage company EMC Corp EMC.N could be derailed by a tax bill of up to $9 billion, technology news website Re/code reported on Tuesday, citing sources familiar with the matter.

Certain key aspects of the deal, particularly a tracking stock, may not qualify for the sort of tax treatment the companies consider essential for the transaction, the report said.

Sources close to Dell disputed the Re/code story, telling Reuters they were confident there was no such threat to the deal since tax authorities would treat the tracking stock in line with previous similar transactions. The merger agreement also has no requirement on this issue that would prevent the deal from closing, the people added.

EMC shares fell 2.2 percent on Tuesday, ending at $25.25.

Dell, which is trying to become a giant in the fast-growing market for managing and storing corporate data, struck a deal in October to buy EMC.

The offer valued EMC at $33.15 a share. Dell will pay $24.05 per share in cash and will also give EMC shareholders a special stock that tracks the share price in VMWare Inc (VMW.N: Quote), the virtualization software maker majority-owned by EMC.

Tracking stocks allow stockholders to benefit from performance of a specific unit of a publicly traded company, without giving away any ownership or control.

Dell insiders are concerned that the creation of the tracking stock will invite scrutiny by the Internal Revenue Service, Re/code reported.   Continued...

A Dell logo is pictured on the front of a computer in this photo illustration in the Manhattan borough of New York October 12, 2015. REUTERS/Carlo Allegri