Dell Inc Ropes In Several Lenders To Finance Acquisition Of EMC Corporation (EMC)
Dell Inc. has reached out to several lenders to back its acquisition of EMC Corporation (NYSE:EMC). Some of the lenders that will extend funding to Dell include Bank of America Corp (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM) and Goldman Sachs Group Inc (NYSE:GS). Dell is paying $67 billion to take EMC private.
Several banks have been roped in to fund Dell Inc. ’s buyout of EMC in a deal valued at $67 billion. The acquisition of EMC involves cash and stock transaction. Dell is expected to raise part of the cash transaction for the deal through loans from lenders such as Bank of America, Barclays PLC (ADR) (NYSE:BCS), Deutsche Bank and RBC Capital Markets. Others banks involved in the funding of the deal include JPMorgan, Goldman, Citigroup Inc (NYSE:C) and Credit Suisse.
The stock portion of the transaction will be met through new common equity from Dell’s founder and CEO, Michael Dell and his associates, including Mr. Dell’s investment vehicle Silver Lake. Following the transaction, Mr. Dell and his associates will own about 70% of the common equity of the combined outfit. They already own the same stake in Dell currently.
Payout for EMC shareholders
As part of the buyout transaction, EMC shareholders will receive a combined consideration of $33.15 per each EMC share held. The cash portion of the consideration is $24.05 per share with the rest being in form of stock linked to the stake of EMC in VMware, Inc. (NYSE:VMW).
EMC owns 80% of VMware. The combination of Dell and EMC is not expected to affect VMware as the company will continue with its life as publicly traded entity. However, Dell Inc. may consider increasing its stake in VMware in the future.
Dell Inc. intends to maintain its investment-grade debt ratings after closing the transaction. Mr. Dell said the acquisition of EMC will deliver within the initial 18-24 months after closing the deal.
Shareholder approval pending
The board of EMC are already approved the merger with Dell, but the company’s shareholders will have to weigh in before the agreement can be executed.
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