Michael Dell Becomes Billionaire Kingmaker in Broadcom, VMware Deal
Technology entrepreneur Michael Dell once again finds himself at the center of one of his industry’s biggest deals.
Dell holds a roughly $16.2 billion stake in VMware Inc., meaning he’s likely to have a important say in a potential takeover of the cloud-computing provider by chip maker Broadcom Inc. The two companies are in talks about a transaction, Bloomberg News reported Sunday.
While it’s not known what price Broadcom is willing to pay for VMware, which has a market value of $40 billion, it may have to offer a sizable premium to get the company’s shareholders on board.
VMware’s market capitalization touched $70 billion as recently as October, when Dell’s interest would have been worth some $28 billion. Shares in VMware rose 15% in premarket trading on Monday, which would value the company at about $46 billion.
“Valuation and Michael Dell’s 40% stake could be hurdles to Broadcom’s reported M&A interest in VMware,” said Woo Jin Ho, analyst at Bloomberg Intelligence. “Deal synergies exist, but we believe VMware may seek a valuation prior to the recent market drop.”
Buyers offered an average 34.1% premium in takeovers of software companies announced over the past five years, data compiled by Bloomberg show. Assuming Broadcom offered a similar add-on, that would still only value VMware at around $54 billion and it’s unclear whether that would be enough for Dell.
The 57-year old founder of Dell Technologies Inc. has a net worth of $44.2 billion, according to the Bloomberg Billionaires Index, and isn’t shy about getting into a corporate fight.
He took his eponymous PC maker private in 2013 in a $24.9 billion deal in the face of fierce opposition from renowned activist investor Carl Icahn. Around three years later, he led a $67
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