VMware Plunges on Report It May Acquire Dell in Reverse Merger

Molly Schuetz (Bloomberg) -- VMware's shares plunged after CNBC reported that it’s considering acquiring Dell Technologies in a reverse merger, bringing Dell back to public markets in what could be the industry’s biggest deal ever.

VMware, which was absorbed by Dell in its $67 billion acquisition of EMC Corp., could now turn around and buy Dell, CNBC reported, citing unidentified people familiar with the matter. In a reverse merger, VMware would issue shares to Dell’s private owners, which could then sell the stock on the public market, giving them a way to profit from having taken Dell private in 2013 and to help pay off some of its $50 billion in debt, CNBC said.

Dell, which owns about 80 percent of VMware, is considering various options, including a public stock offering, people familiar with the matter told Bloomberg last week. The company’s board is meeting later this month to discuss the options as it seeks ways to boost revenue and raise funds.

VMware dropped as much as 11 percent, the steepest decline in two years, after the CNBC report.

Dell Founder and Chief Executive Officer Michael Dell took his company private in 2013, when he teamed up with Silver Lake Management LLC on a leveraged buyout. That freed Dell to cut costs and work to become a bigger supplier of hardware and software for corporate data centers without the quarterly investor scrutiny that comes with being a public company. Three years later, Dell acquired storage-technology provider EMC and its majority stake in data-center software vendor VMware, taking on a massive debt load to seal the deal.