Dell Technologies said today it would buy the tracking stock of VMware in a cash and stock deal, taking a step closer to a return to the public market and ending a months-long review of its business.
Dell, which owns 80% of VMware, issued the tracking stock in 2016 to fund its purchase of data storage firm EMC.
The elimination of the tracking stock is aimed at simplifying Dell's complex ownership structure without overburdening its balance sheet, which bears around $50 billion in debt.
The world's largest private technology company will exchange each share of VMware tracking stock for 1.3665 shares of its Class C common stock, or $109 per share in cash for a total cash consideration of not more than $9 billion.
A tracking stock is a type of common stock that "tracks" or depends on the financial performance of a specific business unit or operating division of a company rather than the operations of a company as a whole.
Dell said it will list its Class C shares on the New York Stock Exchange following the completion of the deal.
The transaction represents a premium of 28.9% to closing price of Dell's tracking stock on Friday.
The cash component of the offer will be financed by a one-time $11 billion special dividend that VMware will pay out pro-rata to its shareholders.
After the deal, VMware shareholders will own between 20.8% and 31% of Dell depending on how many investors opt for cash, Dell said.
Private equity firm Silver Lake helped bankroll Dell chief executive Michael Dell in taking the company private in 2013 in a $24.9 billion leveraged buyout.
