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Dell Tech: We have a plan B for bog standard IPO

Contingency plan in place if VMware investors don't like reverse merger proposal

Dell Technologies has finally confirmed what the rest of the industry has suspected for some time: it is considering a straightforward IPO in addition to a torturously tangled reverse merger involving VMware.

Talk of Dell going public again first surfaced last month, when a loquacious insider told Reuters that a plan was on the table.

It was claimed that discussions with banks who'd be candidates to underwrite the IPO had commenced, and that Dell was to push back a scheduled VMware investor roadshow.

Dell's first option for relisting on the stock market was its $9bn plot for VMware to undertake a “reverse merger”, buying out its parent so Dell Tech could return to the bourse without an IPO.

At present, Mick D's biz owns 82 per cent of VMware - 50 per cent is under the control of the owners of tracking stock DVMT, 32 per cent is owned by Dell the man and private equity house Silver Lake, and the remainder is publicly traded.

However, Dell has now confirmed in an 8-K filing with the SEC that an IPO has been considered as an option, if stockholders don't like the VMware play - the Class V move.

“The Board continues to believe that the Class V transaction is in the best interests of Dell’s stockholders and Dell is proceeding to seek stockholder approval for the Class V transaction”, the filing stated.

However: “The Board conducted a comprehensive evaluation of three other distinct business opportunities, including an initial public offering of its Class C Common Stock … as a potential contingency plan in the event that the Class V transaction is not consummated, Dell has met with certain investment banks to explore a potential initial public offering of its Class C Common Stock.”

That doesn't make an IPO a guaranteed Plan B, however. The filing stated there is “no assurance” that the company would take that option.

In September, CFO Tom Sweet told an investor call the status quo is the most likely outcome if the Class V transaction is rejected.

Dell Tech took an important step towards the transaction in another filing, containing the proxy statement/prospectus for the proposed Class V transaction. ®

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