Dell Technologies is spinning off its 80.6% equity ownership in VMware, forming two standalone public companies.
At the transaction closing, VMware will distribute a special cash dividend of $11.5 billion - $12 billion to all VMware shareholders, including Dell Technologies. Based on Dell Technologies' current 80.6% ownership in VMware, Dell Technologies would receive approximately $9.3 billion - $9.7 billion and intends to use the net proceeds to pay down debt.
If the deal closes, Dell Technologies shareholders would receive approximately 0.44 shares of VMware for each share of Dell Technologies that they hold, based on shares outstanding today. VMware will shift from a multi-class to a single-class share structure, while Dell Technologies' share structure remains the same.
The transaction is expected to close during the fourth quarter of 2021. But before closing, Dell wants the IRS to ensure the transaction will qualify as generally tax-free for Dell Technologies shareholders.
Upon completion of the spin-off, Michael Dell will remain chairman and CEO of Dell Technologies, as well as chairman of the VMware board. Zane Rowe will remain interim CEO of VMware, and the VMware board of directors will remain unchanged.
The two companies have worked hard the past few years to create complementary products. Now, they say they will continue to align on sales and marketing activities.
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VMware will also continue to use Dell Financial Services to help its customers finance their digital transformations.
"Both companies will remain important partners, providing Dell Technologies with a differentiated advantage in how we bring solutions to customers,” said Michael Dell in a statement today. “At the same time, Dell Technologies will continue to modernize its core infrastructure and PC businesses and embrace new opportunities through an open ecosystem to grow in hybrid and private cloud, edge and telecom."